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The influence of state institutions on the implementation of neoliberal reforms

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The influence of state institutions on the implementation of neoliberal reforms evidence from the Mexican case
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Just, Diane Michaelle
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Agrarian reform ( jstor )
Agricultural land ( jstor )
Corporatism ( jstor )
Economic reform ( jstor )
Land use ( jstor )
Political institutions ( jstor )
Political organizations ( jstor )
Political reform ( jstor )
Political systems ( jstor )
Rational choice theory ( jstor )
Dissertations, Academic -- Political Science -- UF ( lcsh )
Economic conditions -- Latin America -- 20th century ( lcsh )
Economic policy -- Latin America ( lcsh )
Liberalism -- Latin America ( lcsh )
Political Science thesis, Ph. D ( lcsh )
Politics and government -- Latin America -- 20th century ( lcsh )
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Thesis (Ph. D.)--University of Florida, 1999.
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Includes bibliographical references (leaves 232-259).
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Printout.
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Vita.
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by Diane Michaelle Just.

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THE INFLUENCE OF STATE INSTITUTIONS ON THE IMPLEMENTATION OF
NEOLIBERAL REFORMS: EVIDENCE FROM THE MEXICAN CASE















By

DIANE MICHAELLE JUST


A DISSERTATION PRESENTED TO THE GRADUATE SCHOOL
OF THE UNIVERSITY OF FLORIDA IN PARTIAL FULFILLMENT
OF THE REQUIREMENTS FOR THE DEGREE OF
DOCTOR OF PHILOSOPHY

UNIVERSITY OF FLORIDA


1999





























Copyright 1999

by

Diane Just
































To my Grandmother, Emma Klein Just














ACKNOWLEDGMENTS


Without the unwavering assistance of a number of very special individuals, this

project would never have been possible. First and foremost I would like to thank my

advisor, Dr. Philip Williams, for his support throughout this process. I owe him a debt of

gratitude for his advice, direction and boundless patience. He has especially encouraged

me to look at labor issues that I might otherwise have neglected, and this project is far

better balanced as a result. I am also enormously grateful for the help of each of my

committee members, who have contributed in different ways over the years to the

completion of this work. Dr. Leann Brown has compelled me to organize my thoughts

more coherently, and to think critically about definitions and methodology. Dr. Goran

Hyden has provided crucial comments on several drafts at different stages of completion,

and motivated a reorganization of my theoretical discussion. Dr. Michael Chege has been

at hand to discuss the direction of this work, and has aided my conceptualization of

institutional theories. Dr. Clyde Kiker has provided insights about the logical development

of my arguments, and stuck with this project even when it moved in a direction that lies

outside his usual interests. I would also like to thank Dr. Steven Sanderson, my advisor

during the early stages of this project, for helping to bring me to the University of Florida,

spurring my interest in development issues, and guiding my study of Latin America.

Enormous thanks go to my parents, Dr. and Mrs. John J. Just, for their love and

support through the ups and downs of writing, and for reading and commenting on drafts.








They have happily done far more than most parents would ever attempt. I am grateful to

my Grandmother, Emma Just, to whom this work is dedicated, for her constant

encouragement of my intellectual development and my interest in international issues.

Special thanks are also due to my boss, Dr. Joel B. Cohen, for his willingness to

accommodate my academic schedule and deadlines over the years. I am also extremely

grateful to the Lola Cruz and the entire Santoyo-Cruz family for letting me get to know

Mexico from within their remarkable household. Without their generosity and

benevolence, I would never have come to care so deeply about Mexico, nor struggled so

hard to understand it. Last but certainly not least, I would like to thank my fiance, Faure

Joel Malo de Molina Faxas, for his unending encouragement and loving support during

many long hours of work.













TABLE OF CONTENTS
pne~

A CKN OW LED G M EN TS ......................................................................................... iv

A B ST R A C T ........................................................................... ...... ..... ix

CHAPTERS

1 INTRODUCTION: HOW DO INSTITUTIONS IMPACT NEOLIBERAL
R E F O R M S ? ......................................................................................................... 1

The Spread of N eoliberalism ............................................................................ 2
D efinition of Institutions ................................................................................... 8
Theoretical and Methodological Approach ...................................................... 11

2 IMPACTS OF INSTITUTIONAL FACTORS ON NEOLIBERAL
DEVELOPMENT POLICY: THEORETICAL SUPPORT ............................. 17

What is Meant by the Umbrella Term "Institutional Approach?" .................... 17
Approaches to the Study of Institutions .......................................................... 19
R atio n al C h o ice ............................................................................................ 2 2
Sociological / Organizational Institutionalism .............................................28
H istorical Institutionalism ........................................................................ 35
Policy Im plem entation Literature ................................................................... 41
C o n clu sio n .................................................................................................. . 4 5

3 STATE INSTITUTIONAL POWER DURING THE IMPLEMENTATION
OF NEOLIBERAL POLICIES IN LATIN AMERICA ...................................... 48

Latin American Development Strategies and Institutional Heritage ................. 50
The Spread of N eoliberalism ......................................................................... 60
The Emphasis on Change in Literature about Neoliberal Reforms ....................... 65
Evidence of Continuity due to Institutions during Reforms ............................. 69
C o n c lu sio n ........................................................................................... ............ 7 8

4 CASE BACKGROUND: THE HISTORY OF THE
INSTITUTIONALIZATION OF THE MEXICAN STATE .. .................... 80

The Institutional Heritage of the Mexican Revolution ......................................... 83
The Relationship Between the PRI and the State ........................................... 88








Mexican Corporatism, Clientelism and Corruption .............................. 93
T h e S e x e n io ..................................................................................................... 10 4
Neoliberal Policies and Trade Agreements .............................. 107
C o n clu sio n ................................................................................................. . 111

5 THE MAINTENANCE OF INSTITUTIONAL INFLUENCE IN MEXICO:
CORPORATIST INSTITUTIONS, PACTS, AND STATE-LABOR
IN S T IT U T IO N S .............................................................................................. 115

General Institutional Effects at the National Level ............................................ 116
Declining Corporatism and Clientelism? ........................................................... 124
Corporatist Institutions Embodied in Pacts at the National Level
during N eoliberal R eform s ............................................................................ 129
The Pact of Domination-An Informal Pact ............................................... 130
The Pact for Economic Solidarity and other Formal Pacts ........................... 131
State Institutions Impacting Neoliberal Reforms to the Labor Sector ................ 136
Historical Incorporation of Labor into the Corporatist System .......................... 136
Institutional Continuity during Neoliberal Reforms to the Labor Sector ............ 140
C o n clu sio n ....................................................................................................... 15 0

6 THE INSTITUTIONAL INFLUENCE ON NEOLIBERAL REFORMS IN
TH E A G RA RIAN SECTO R ........................................................................... 153

Comparative Background: Agrarian Counter-Reform in Latin America ............ 155
Nicaragua: Sandinista Agricultural Cooperatives ....................................... 156
Chile: From Asentamientos to Parcelas ...................................................... 158
Comparative Observations on Institutional Heritage during Agrarian
C ounter-R eform s .................................................................................. 16 1
The Ejido and Ejidal R eform s ........................................................................... 162
H istorical R ole of the Ejido ........................................................................ 162
Reasons for the Proposed Dismantling of the Ejido ..................................... 164
The Current Status of the Reforms: The Implementation of PROCEDE
and Private Sector-Ejido Joint Ventures ................. . 168
The Role of the State during these Neoliberal Reforms in the Agrarian
S e c to r ................................................................................................... 1 8 6
The Influence of the CNC, the FNOC and the IMSS ........................................ 191
The Procuraduria Agraria and Other Institutions .............................................. 194
P R O N A S O L ................................................................................................... 19 9
P R O C A M P O ................................................................................................... 2 0 5
C o n clu sio n s ...................................................................................................... 2 0 8
7 CONCLUSIONS: DEVELOPMENTAL IMPLICATIONS OF
IN STITU TIO N AL EFFECTS .......................................................................... 210

Sum m ary of Institutional Effects ...................................................................... 211








In Search of a Hierarchy of Significant Institutional Attributes .......................... 217
Significance of Institutional Effects to Development in General ........................ 221
A Concluding Discussion: What Does the Future Hold? ................................... 228

R E F E R E N C E S ............................................................................................................ 2 32

B IO G R A PH IC A L SK ETCH ....................................................................................... 260















Abstract of Dissertation Presented to the Graduate School
of the University of Florida in Partial Fulfillment of the
Requirements for the Degree of Doctor of Philosophy

THE INFLUENCE OF STATE INSTITUTIONS ON THE IMPLEMENTATION OF
NEOLIBERAL REFORMS: EVIDENCE FROM THE MEXICAN CASE

By

Diane M. Just

December 1999


Chairman: Philip J. Williams
Major Department: Political Science

Since the early 1980s in Latin America, neoliberal policy makers have advanced

strategies of privatization, liberalization and structural adjustment as the solutions to

economic development problems of the region. Analysts describe a rapidly diminishing

role for the state, and point to examples of privatization and liberalization. Yet such

portrayals are overzealous: the actual implementation of neoliberal reforms has fallen short

of the outcomes originally envisioned. Having demonstrated the limits to the success of

neoliberal reforms in Latin America in general, this study moves to a case study of one

country, Mexico, in a quest for knowledge of the role of institutions during these reforms.

Using a historical institutionalist perspective, a spectrum of formal and informal

institutions of the state are found to impact these reforms. The institutions under study

include communally held lands (elidos), the National Peasant Confederation (CNC), the








Confederation of Mexican Workers (CTM), the National Federation of Organizations and

Citizens (FNOC), the Federal Labor Law (LFT), economic solidarity pacts (the PSE and

PECE), the Office of the Agrarian Counsel (PA), the National Solidarity Program

(PRONASOL) and the Direct Rural Support Program (PROCAMPO). Data from the

Program for Certification of Ejido Land Rights and the Titling of Urban House Plots

(PROCEDE) reveals the continuing significance of the ejido in Mexico today. Informal

institutions such as corporatist and clientelist norms and values are also shown to have a

significant impact. Many informal institutions of the state are reincarnated within new

formal institutions, and as a result, the state functions in many of the same ways. These

institutions hinder and distort the outcomes of neoliberal reforms, and are more enduring

than is commonly acknowledged. A brief discussion of the relative significance of various

institutions is provided. This work demonstrates the powerful heritage institutions have

even during periods widely characterized as times of change. The implications of these

results for development in other Latin American cases are also reflected upon.














CHAPTER 1
INTRODUCTION: HOW DO INSTITUTIONS IMPACT NEOLIBERAL REFORMS?


As the 20t century draws to a close, scholars reflect on an era of contradictions.

Exponential growth in technology, education and communication is countered by growing

environmental concerns, problems of food distribution and an expanding number of

impoverished citizens and refugees. These contrasts make the selection of sound national

development policies a serious and complex task, as policy makers must weigh the

consequences of their choices from a number of different angles. The impacts of their

decisions are frequently profound, although not always in the ways the policy makers

hope. New policies frequently fall short of their objectives because the institutional

context is not fully considered.

This study examines the impact of institutional continuities on the implementation

of development policies. Specifically, the goal is to reveal how institutions affect

neoliberal reforms. The focus on Mexico was selected both because of my experience

there and because its state institutions have deep historical roots. This research suggests

that corporatist and clientelist institutions in particular are remarkably enduring even when

other institutions are dismantled. These and other state institutions significantly alter the

success of neoliberal reforms. The implications of this study extend beyond the Mexican

case to other regions where neoliberal policies are applied.








This chapter will first introduce the context of neoliberal reforms, a topic that will

be further explored in Chapter 3. Since the objective of this study is to show how

institutions affect the implementation of neoliberal reforms, the discussion will first frame

the context of the reforms. Next, the term "institution" is operationalized and institutions

are distinguished from organizations. The focus is on state and state-affiliated institutions,

both formal and informal, as discussed below. Institutions are defined rather broadly.

In the last section of this chapter, the theoretical and methodological approach

used to decipher the role of institutions during the implementation of neoliberal reforms is

introduced. A brief description of the contents of each chapter is also provided. As

discussed below, Chapter 2 draws out how a historical institutionalist perspective provides

the best explanatory power for this study. The general review of the progress of

neoliberal reforms in Latin America in Chapter 3 is followed by a case study of the impact

of institutions on the implementation of neoliberal reforms in Mexico. A variety of

institutions are discussed, with special focus on how state agrarian and labor institutions

hinder the implementation of neoliberal reforms. The final chapter delves into the

implications of the argument made in this study for development policy making in Mexico

and other states.

The Spread of Neoliberalism


A general desire to understand why the development policies being applied in Latin

America succeed or fail was the impetus for this project. Neoliberal reforms were widely

accepted as the best solutions to debt and other economic problems during the 1980s and

most of the 1990s, but despite the passing years many indicators of development did not








seem to be showing improvement. Observers have vastly opposing views about the cause

of this state of affairs. Some argue that the neoliberal policies were unrealistic or flawed

from the outset, by underestimating or accepting a high initial burden on the poor. Many

others argue that the reforms simply were not enacted properly or that insufficient time

has passed for benefits to accrue.

Neoliberal views became predominant early in the 1980s among such influential

agencies and actors as the International Monetary Fund (IMF), the World Bank, the

United States (U.S.) government, policy think tanks and many academics, and by the late

1980s, the viewpoint had acquired the label of the "Washington Consensus." 1 Following

the onset of the debt crisis in 1981/82, the IMF demanded of recipient governments a

commitment to neoliberal tenets as a precondition for economic assistance. The adoption

of neoliberal reforms took place gradually and unevenly, but most Latin American

countries made the first steps to these reforms during the early to mid 1980s.2

These neoliberal policies represent a significant shift from development models

based on state-led growth popular in the decades before the debt crisis. Such models were

used in Latin America, Africa and in the Eastern Bloc (World Bank 1998:10; Rodrik

1996:12). By the early 1980s, heavy indebtedness and economic instability characterized

many countries in these areas. In Mexico, for example, four broad types of policy goals

existed: (1) "foreign exchange had to be generated," (2) "the role of the government in the




1 Heath makes this point and notes that "John Williamson of the Institute for International
Economics in Washington, D.C., coined the phrase" (Heath 1998:62, fn. 5).
2 For more detailed reviews of the progress of neoliberal reforms in Latin America see
Williamson (1990), Sautter (1993) and Sautter and Schinke, eds. (1996).








economy had to be examined," (3) "economic stability had to be achieved," and (4) "debt

ratios had to be addressed" (Heath 1998:41-42). Similar needs were present throughout

Latin America and in other developing areas, and national policy makers accepted the

Washington Consensus as the only remaining solution.

Neoliberal views soon gained paramount importance in the development strategies

of almost all developing countries.3 They advocated a dedication to trade liberalization,

structural adjustment and privatization of state-run industries. Adjustment of domestic

economic disequilibrium was necessary in the short-term, with restructuring of

development strategies in the medium- and long-term (Mesa-Lago 1994:ix). The initial

adjustment was often referred to as "shock treatment." Neoliberal reforms aim for a quick

and sweeping privatization of state-run enterprises as well as the reduction of spending on

state-run programs and institutions. Their goals include the modernization / minimization

of state institutions in exchange for a liberalization of the private sector and the promotion

of competitiveness in agriculture, industry and services. In terms of the size of the state,

according to a World Bank study, "...public sectors are reorienting themselves and

downsizing. 'Less is better' has been the cry" (World Bank 1998:83). For neoliberals, a

continuation of traditional state institutions (e.g., import-substitution institutions or






3 Anne Krueger was one of the strongest critics of import-substitution industrialization
and advocate of neoliberal reforms (Rodrik 1996:12). The influential arguments made
during the 1980s and early-1990s by another advocate of the market, Deepak Lal, have
been collected in Against Dirigisme: The Case for Unshackling Economic Markets
(1994). Some Latin American proponents of neoliberalism are Hernando de Soto (see
Soto 1989) and economists such as Juan A. Morales (see Morales 1993, and Morales and
McMahon, eds., 1996) and Domingo Cavallo (see Cavallo 1997).








populist institutions4) represents an impediment to successful development because of

their inefficient and often corrupt structures.

In the early- and mid-i 990s, more international policy makers concurred on this

view of state institutions than in earlier decades. Latin American leaders have been

primarily concerned with how to dismantle populist state institutions rather than debating

the potential benefits of their role in the national political-economy (Burki and Edwards

1996a). Neoliberal policies gained popularity in part because they were presented as

practical solutions to economic and financial problems. Neoliberals advise against special

protections for domestic producers, for example, which makes balancing a national budget

easier (Ferndndez Jilberto and Mommen 1996b: 1-2).

Despite widespread acceptance during the 1980s and most of the 1990s,

neoliberalism and its concurrent recommendations were criticized, although arguments

countering the claims of neoliberals were heard less frequently, and tended to receive little

serious attention when national policies were being formed and implemented.5 The

preponderance of neoliberal views prompted scholars to ask how this would impact

development. Prior to undertaking this study, for example, several questions came to

mind about the implementation of neoliberal policies and the implications for development:

How successful are neoliberal policies at achieving their intended outcomes, and what




4 "Populism" is a type of political leadership based on the use of policies designed to
create, maintain or sustain the popularity and reign of a political leader or regime. It is
criticized for the way it frequently prioritizes the political success of an individual or
regime at the expense of the long-term development goals of a polity.
5 See, for example, Gledhill (1995) or the critical discussion of neoliberalism by Petras
(1997).








interferes with their success? Ultimately, how neoliberal are national neoliberal policies

when put into in practice? Do discrepancies exist between national policy goals and

subnational policy implementation? Does neoliberalism inadvertently coexist with other

development policy models?

Proponents of the Washington Consensus also had occasion to pose similar

questions to themselves during the 1990s. By 1998-1999, neoliberalism has lost a great

deal of credibility even at the IMF and the World Bank. The neoliberal message itself has

changed:

... [N]eoliberalism has evolved over time, passing from its 'savage
capitalism' phase at the start of the debt crisis, in the heyday of Ronald
Reagan and Margaret Thatcher, to a kinder, gentler neo-liberalism in the
1990s. To varying extents, neo-liberals have rediscovered the issue of
poverty, and the need to educate their citizens. At least at the level of
rhetoric, few politicians would now admit to being a neo-liberal, as the
'social market' has become the catchphrase of the caring 1990s. (Green
1995:177)

Even a recent World Bank (1998:11) policy research report acknowledges the

transformation from pure neoliberalism, calling its heyday,

... a brief period when government failure was seen as pervasive and
complete, and markets (if not the solution) as the only hope.
Today's... view-pragmatic but not ideologically satisfying-is that both
markets and governments have pervasive failures but that these usually are
not complete. This emphasizes that government should focus on areas
where the problems in the absence of intervention are greatest-but
government must have the capacity to improve the situation.

Perhaps the ultimate challenge to neoliberalism surfaced with the Asian economic

crisis that came to a head in Thailand on July 2, 1997, and the economic crises which

subsequently touched Russia, Latin America and even the industrialized nations (Rodrik

1998). The loss of credibility of the East Asian model hits close to the heart of neoliberal

reassessments of their recommendations. The economic performance of the four East








Asian tigers (South Korea, Taiwan, Singapore and Hong Kong) had been lauded as proof

of the efficacy of neoliberal ideals since the 1980s.6 Evaluations of the extent to which

the East Asian economies actually followed the recommendations of the Washington

Consensus did reveal significant shortcomings (Rodrik 1996).7 Yet the example of their

relative success prior to 1997 helped encourage many countries (especially many Latin

American countries) to follow and even surpass the East Asian countries in adherence to

the tenets of the Washington Consensus (Rodrik 1996:17-18). A prime example is

Mexico, frequently cited as one of the strictest adherents to neoliberal recommendations

(Rodrik 1996:18). The trade and financial liberalization and privatization of countries

such as Bolivia, Argentina and Mexico surpassed those of the East Asian countries

(Rodrik 1996:18). The relative success of Latin American countries in implementing

neoliberal reforms is discussed further in Chapter 3. Chapters 5 and 6 will contest the true

depth of Mexico's adherence to neoliberal tenets.

Following the problems brought on by the Asian economic crisis, the neoliberal

model is being replaced by what scholars at the World Bank now call a "two-pronged"

development strategy that involves an effort to:

... put in place growth-enhancing, market-oriented policies (stable macro-
economic environment, effective law and order, trade liberalization, and so
on) and ensure the provision of important public services that cannot be
well and equitably supplied by private markets (infrastructure services and
education, for instance). (World Bank 1998:11)




6 For a discussion, see Rodrik 1996:12-13.
7 Rodrik judges how closely South Korea and Taiwan followed the prescriptions of the
Washington Consensus, and awards South Korea a score of "about five" (out often) and
Taiwan a score of "about six" (Rodrik 1996:18).








Good policymaking, institution building, and the provision of public services have gained

significance alongside the development of capital markets (World Bank 1998:11).

This list-policymaking, institution building and the provision of public services--

suggests the powerful influence of state institutional variables, giving credibility to the

goal of highlighting the role of such institutions. This disquisition attempts to provide

answers to some questions about the success of neoliberalism by revealing the influence of

state institutions on the implementation of reforms. If the implementation of neoliberal

reforms is hindered and distorted by institutions, a definition of institutions is certainly in

order.

Definition of Institutions


In the social science literature "institution" is defined narrowly or broadly; here it is

used broadly, to refer to both formal and informal structures or processes, as discussed

below. This section will clarify the present use of "institution" by discussing what "state

institutions" are and distinguishing institutions from organizations. It will also

differentiate between formal and informal institutions.

As it is not possible or desirable to discuss every variable that influences economic

development, the present study will focus only on the role of state and state-affiliated

institutions (hereafter called simply "state institutions") during the implementation of

neoliberal reforms. The "state" is the governing structure of a society, and includes

government agencies and bureaucratic positions, but is not merely the particular elected

regime of any given electoral period. Its size and power depend both upon historical

factors and societal influences. It has autonomous power and interests that may outweigh








the goals of particular governing regimes. Likewise, its needs may change under the

pressure of internal or external forces. "State institutions," on the other hand, are formal

or informal institutions of the state. A state has a variety of state institutions.

Since state institutions are created by and operated for the state, they should share

its mandate and carry out its plans. Here it will be demonstrated that large deviations

from the officially proclaimed state policy are often a result of factors inherent in the

institution itself Focusing only on state institutions will help to isolate how these

institutional effects interfere with neoliberal policies.

"State institutions" may or may not be formal organizations. An organization may

be an institution, but not all institutions are organizations. An organization, more

precisely, is a manifest entity designed by people to serve a purpose. Many social

scientists have grappled with the distinction between institutions and organizations. Three

common categories of organizations and institutions may be distinguished: "(a)

organizations that are not institutions, (b) institutions that are not organizations, and (c)

organizations that are institutions (or vice versa, institutions that are organizations)"

(Uphoff 1986:8).

In the present research, only the second and third of these institutional-

organizational links are examined. Organizations that are not institutions, or put

somewhat differently, organizations not heavily influenced by historical institutional norms

are not discussed. For example, some new state organizations created by a new governing

regime to fulfill specific new policy goals do not have an institutional heritage and are thus

not the foci of this study.








One difference between organizations and institutions lies in the relationship

between function and existence. An organization may survive for a time without

functioning, but when an informal institution ceases to function, its very existence is

uncertain. Some historically strong institutions occasionally seem to disappear, only to be

reborn through new channels or within new organizations.8 The strength of institutions is

frequently underestimated; evidence relevant to this notion will be examined later in this

study.

Both formal (institutionalized) organizations of the public sector and more

informal understandings of the roles and responsibilities of the state towards different

social sectors will be examined. Formal institutions of the state are fairly simple to define

and conceptualize. Informal institutions of the state are more difficult to define

coherently. "Informal" refers to such things as unwritten and perhaps even unspoken

agreements over relations or transactions, through which customary actions carry

obligatory meanings. Informal institutions may include historical norms, values and

traditional means of interaction. The meaning of the term informal should not be

misconstrued as "unimportant." Many norms that govern interactions between state and

society are informal institutions of the state (i.e., they originated from the state or came

about through repeated interaction between the state and society). Informal institutions

include corporatist political practices, involving many unwritten ties between groups

within government and certain constituencies. An example of a formal institution, on the

other hand, is the ejidal (communally-held) system of land tenure in Mexico. Nonetheless,


8As one example, note the reform of the popular sector of Mexico's ruling party
mentioned in Chapter 5.








many informal institutions also govern interactions on ejidos and among ejidatarios

(members of ejidos).

Formal institutions of the public sector and informal institutions such as cultural

norms frequently share similar roots. Social interactions (informal institutions) often

become routine at the same time that formal institutions settle into the provision of

services. Both informal and formal institutions may influence the same transactions.

Informal patterns may be as important as or even more important than formal

organizations, and they often account for the discontinuity between proclaimed policy

goals and actual policies in practice. This is especially true in many areas of Latin

America, since informally institutionalized interactions are common in the region and

frequently of substantial significance.

Theoretical and Methodological Approach


In Chapter 2 a number of different theoretical approaches to the study of

institutions are reviewed. Ultimately, a historical institutionalist perspective is chosen

because it provides the most explanatory power, but the institutional analysis is also linked

to micro- and macro-level approaches. Historical institutionalists argue that institutions

have a significant effect on their environment. Institutions shape the thoughts, behaviors

and choices of individuals, as well as limiting the range of and speed of possible

environmental changes. The use of a historical institutionalist approach provides a way to

study the impact of large state institutions over time. Using this approach it is possible to

study subnational processes, structures and routines that transcend, outlive and therefore








outweigh the impact of particular politicians or other political actors. This is a very useful

means of studying the long-term impacts on development.

Chapter 3 furnishes a general discussion of the role of state institutions in Latin

America over time. A review of the role of state institutions during the era of the populist

Latin American state is followed by a general investigation into the significance of

institutional heritage during the execution of neoliberal reforms, periods most widely

characterized as times of change. During the decades of neoliberal reforms in Latin

America, scholars frequently emphasize the modifications to preexisting development

policies, thereby effectively underrating institutional continuities. This chapter will

provide evidence that it is precisely in the throes of such reforms that the influence of

historical institutions may become most consequential. A review of the anticipated

changes, the goals of neoliberal policies, and the progress of the reforms is made.

Evidence of the limits to the success of neoliberal reforms in Latin America is presented.

The delays to the success of neoliberal reforms may or may not be the result of

institutional effects. In order to descry whether institutional effects are indeed causally

significant, a closer examination of a particular case is necessary. The fourth chapter

provides background for a case study of Mexico that will provide insight into how

significant institutional effects are.

The significance of the role of historical institutions is best revealed through the

use of a case with many long-standing institutions. Mexico has the longest history of

political stability in Latin America, and is considered one of the closest followers of

neoliberal reforms. Since Mexico is such a useful case of overt continuity in a political








system, it provides an excellent window into whether state institutions have significant

influence even during neoliberal reforms.

The chapter begins with brief general background of the Mexican case from the

time of the Revolution. Key components include the formal and informal institutional

heritage of the Mexican Revolution, an introduction to Mexican corporatism and the

fusion of the official party and the state, and a description of the electoral cycle (the

sexenio). Neoliberal critiques of these institutions are provided. Mexican corporatism, for

example, is censured for promoting an economic and political order based on partisan (and

often corrupt) political loyalties rather than effectiveness or competency. This essential

background to the Mexican case is followed by an examination of specific evidence.

The evidence for these two key chapters is collected from a broad swath of

literature. A vast amount of high quality research is available on Mexico. This literature

was used as the source of information about the role of institutions during neoliberal

reforms. Analysis of this research was aided by insights gained during my previous

experience in Mexico (a total of more than a year between 1989 and 1994).

Interaction with other Latin Americanists in general and Mexicanists in particular

via email discussion lists has also proved invaluable to the interpretation of evidence.

Several members of the Scholars for Mexican Rural Development (MRD)9 have aided

particular aspects of this research, especially in conceptualizing institutions in the agrarian



9 The MRD Network provides the following information about itself: "Scholars for
Mexican Rural Development (the MRD Network) was founded in January 1992 by
Theodore E. Downing (University of Arizona), as part of the ANTHAP network
developed by James Dow at Oakland University in Rochester, Michigan. It was
developed in response to the rapidly unfolding events in rural Mexico. In 1995, Gerardo
Otero, Simon Fraser University, joined Downing as the co-facilitator of the MRD."








sector. In addition, some data was obtained directly from Mexican agrarian institutions

through mail, email and telephone. For example, in the section on ejidos in Chapter 6,

data was obtained from the National Agrarian Registry (the Registro Agraria Nacional).

Mexico's communication systems have increased the opportunities to gain valuable insight

about local events even from a considerable distance.

Research relying upon secondary literature is a particularly valid methodology for

a study that attempts to answer the broad questions raised here. The issues lend

themselves very well to a qualitative research method, and one of the greatest challenges

to scholars conducting qualitative research is the attempt to remain objective. The use of

secondary data might even ensure a higher standard of objectivity than could be expected

if conclusions were based exclusively on qualitative evidence collected first-hand. Instead,

the observations of many scholars are collected and presented in a unified fashion.

A common thread among the observations of a variety of scholars on the interplay

of continuity and change, structure versus agency, institutions and the role of individuals is

demonstrated, yet what results is not merely a summary of the work of others. Instead,

the evidence collected here supports conclusions that frequently differ in important

respects. Simply put, while much of the literature emphasizes elements of change, this

study highlights continuities caused by institutional factors.

Chapters 5 and 6 provide evidence from Mexico about how and to what extent

state institutions affect the implementation of neoliberal reforms. The significance of a

number of both informal and formal institutions during the implementation of neoliberal

reforms in Mexico is documented. In Chapter 5, a reflection on the role of pacts as formal

embodiments of corporatism follows a discussion of corporatist institutions in general.








The impact of the Federal Labor Law on neoliberal reforms affecting the labor sector is

examined. In Chapter 6, an analysis of the role of the ejido is bolstered using primary data

gathered from the Mexican agrarian sector. The role of a variety of other institutions,

including the Mexican Workers Confederation (the Confederaci6n de Trabajadores de

M xico or CTM), the National Peasants' Confederation (Confederaci6n Nacional

Campesina or CNC), the National Front of Organizations and Citizens (Frente Nacional

de Organizacionesy Ciudadanos or FNOC), the Mexican Social Security Institute

(Instituto Mexicano de Seguridad Social or IMSS) and the Office of the Attorney General

for Agrarian Affairs or Office of the Agrarian General Counsel (Procuraduria Agraria or

PA), is discussed. The National Solidarity Program (Programa Nacional de Solidaridad

or PRONASOL) and the Direct Rural Support Program (Programa de Apoyo Directo al

Campo or PROCAMPO) are also shown to be relevant in this study. A broad variety of

evidence from a number of different formal and informal institutions suggests that the

implementation of neoliberal reforms is being hindered and distorted by institutional

factors.

The final chapter is a discussion of the implications of this research, which extend

beyond simply the Mexican case or even Latin America. This examination and critique of

the practical implementation of development policies is conducted in the hopes of spurring

the refocusing, adjustment or advancement of development ideas and ideals. What does

the revelation of institutional effects imply for development in general? Institutions can

best aid development (or at least not hinder it) if their existence is acknowledged and

taken into account by policymakers. This study reveals the difficulty-indeed, at times,

the apparent impossibility-of undoing certain institutions. It is unrealistic to expect such








institutions will simply disappear, therefore, policies that assume and require such a

possibility are doomed from the outset. As the 1999 United Nations Development

Program Human Development Report (1999:8) argues:

Economic policy-making should be guided by pragmatism rather than
ideology-and a recognition that what works in Chile does not necessarily
work in Argentina, what is fight for Mauritius may not work for
Madagascar. Open markets require institutions to function, and policies to
ensure equitable distribution of benefits and opportunities. And with the
great diversity of institutions and traditions, countries around the world
need flexibility in adapting economic policies and timing their
implementation.

Institutional effects should be taken into greater account when formulating

development policy, whether free-market oriented or otherwise. As neoliberal policies are

implemented, they are sometimes adjusted to accommodate institutional variables into

development schemes, as the discussion of the ejido in Chapter 6 will reveal. These

adaptations can aid development by creating a better match between policies and their

environment. Yet this study will also reveal many ways that development is affected when

institutional effects are not adequately incorporated into policy making and policy

implementation. When this occurs, policy outcomes may differ vastly from those

originally envisioned by policy makers. This study concludes with a discussion of how the

effects of state institutions on neoliberal reforms impact development in general.














CHAPTER 2
IMPACTS OF INSTITUTIONAL FACTORS ON NEOLIBERAL
DEVELOPMENT POLICY: THEORETICAL SUPPORT


To add to an understanding of the implementation of development policies this

study focuses on the role of institutions. An institutional perspective provides a useful

lens through which to view issues of development policy implementation, since the neglect

of institutional effects leaves scholars with only weak understandings of political and

economic interactions. This chapter will first roughly distinguish institutional paradigms

from other ways of knowing and then delve into a survey and comparison of several main

types of institutional approaches. In the end, a historical institutional approach is

determined to be the most useful, because of the insights it can provide into how

institutions influence decision-making, thereby impacting development. The chapter

concludes with a discussion of how this mid-level institutional approach will be

complemented with insights gained from macro- and micro-level perspectives.

What is Meant by the Umbrella Term "Institutional Approach?"


Institutional approaches are distinct from other ways of studying political, social

and economic phenomena, which may be divided into three general paradigms: (1)

institutional approaches, (2) behavioralist / utilitarian approaches, and (3) social

determinist / Marxist approaches (Immergut 1998:12). These approaches have varied in

popularity over time. Institutional approaches are mid-level approaches to the study of








political, economic and social phenomena, whereas behavioralist / utilitarian approaches

are micro-level, and social determinist / Marxist approaches are macro-level. Although an

institutional approach is adopted here (as explained below), some linkages to the insights

of micro- and macro-level scholarship are made as well.

Within the field of political science, analyses of institutions dominated research at

the end of the 19th century and beginning of the 20' century. This "old" institutionalism

focused on constitutions and formal institutions of government, yet considered them to be

dependent, not independent, political variables. 1 The current renewal of interest in

institutions developed in reaction to the behavioralist revolution of the 1950s and 1960s

(Scott 1995:7). Behavioralist research focused on observable individual behavior, and

used this observed behavior to explain government. The institutionalist approach is

selected here because behavioral assumptions have the following weaknesses: (1) the

assumption that political behavior reveals preferences, (2) the assumption that the

aggregation of interests is efficient and unproblematic, and (3) the normative assumption

that institutions are therefore unbiased and just; social determinist approaches, on the

other hand, are repudiated for assuming that interests are objective and social class /group

based (Immergut 1998:6-8, 12).

This framework serves to distinguish institutional approaches from other types of

research in the social sciences, but reveals little about the diversity of institutional

approaches themselves, including rational choice, branches of organization theory

(sociological institutionalism) and historical institutionalism. This analysis will rely upon


1 See Eckstein (1963).








insights from several institutional approaches, but the historical institutionalist perspective

will be shown to possess the best explanatory power for approaching the study of the role

of institutions during neoliberal reforms.

Approaches to the Study of Institutions


Institutional theories vary considerably, especially on the autonomous explanatory

power they attribute to institutions. Important similarities exist in the cycles of popularity

of the study of institutions over time and across disciplines. In economics, sociology and

political science, the novelty of institutional approaches is debated. Most institutional

theories today are thrown under a label of "new institutionalism" / "neoinstitutionalism,"

although many scholars deny that much institutional analysis is new in theoretical content

(e.g., H6ritier 1998).

Many scholars have attempted to organize institutional theories into various

categories.2 Institutions and Organizations (1995) by W. Richard Scott is an example of

this type of literature, providing a concise guide to an abundance of overlapping literatures

on institutions. These scholars' categorizations differ in important respects, but do have

certain similarities. New institutionalism challenges the research style of behavioralist

research (Olsen 1998). Most of the categorizations set one group of institutionalists,

rational choice theorists, apart from other groups. For this reason, this discussion of

institutional theories will examine the tension between rational choice and other

institutional approaches.


2 See, for example, Scott (1995), Thelen and Steinmo (1992), Resen (1998), Keman
(1998), H6ritier (1998), Immergut (1998), Koeble (1995), Kato (1996), Ethington and
McDonagh (1995) and Klein (1994 [originally 1980]).








The study of the role of institutions is plagued by an ongoing tension. Institutions

and individuals are factors in systems where cause and effect are blurred by constant

interaction. The origin of motivation is sought in the ongoing question: Do institutions

motivate individuals to act in certain ways, or do rational individuals create institutions

according to utility-maximizing blueprints? In the attempt to pin down the source of

motivation, the analyst must often ignore certain contradictory effects. Yet scholars must

attempt the task, or risk gaining no insights whatsoever. The study of institutions,

therefore, has been approached from what may be viewed as two general starting points:

the individual or the institution.3

Each of these initiation points provides a gateway to fruitful analyses. Yet even if

performed by the best of scholars, an infinite number of studies from just one of these

initiation points would still result in an incomplete depiction of reality. All theories must,

by their very nature, generalize. When two theoretical perspectives describe similar sets of

interactions, scholars should perceive the benefit to the academic field of continuing

research from each perspective when attempting to gain knowledge.4 The two theories

may fundamentally contradict each other, yet sound reasoning suggests that reality is best

understood through the use of the insights of both perspectives. In this manner, the best

use of institutional theories will be gained:

... [P]rogress is likely to emerge by looking at bi-focal or tri-focal areas...,
which is not to be confused with academic fence-sitting .... to try to work
past the immediate obstacles to mix what may at first appear as oil and


3 For other ways of organizing the study of institutions see, for example, Resen (1998) or
Keman (1998).
4 Many scholars make this argument. See, for example, Immergut (1998), Resen (1998),
Kato (1996), Koeble (1995), Ethington and McDonagh (1995), etc.








water .... When carefully handled, the perspectives allow for synthesis in
ways which have not yet been recognized. (Resen 1998:136)

Indeed, through the use of institutional studies, the outlines of a cumulative discipline may

finally be under the process of construction in political science (Ostrom 1995:179).

Lower-level perspectives (which begin with the individual) may be distinguished from mid-

and higher-level perspectives, which examine institutions and structures:

Instead of separate tables, we need to imagine ourselves working at
separate levels, all viewing a complex mosaic of recursive processes
occurring on multiple time-space fields. Those of us working at the lowest
level need the help of those who can see broader outlines. Those of us
working at a higher level need the help of those who can see how
individuals actually interact with one another to produce the higher-level
phenomena. In such a scientific house, there is no single level that provides
the best answer to all questions. Rather, one has to understand how
different levels provide better answers to some questions than others.
(Ostrom 1995:179)

This study relies primarily on a mid-level institutional perspective, historical

institutionalism. The historical institutional perspective links examinations of how

institutions influence decision-making and standard operating procedures (lower-level

phenomena) with discussions of the macro-consequences of that impact (higher-level

phenomena). When appropriate, however, the discussion is bolstered using insights from

approaches used in other levels of analysis as well.5 Before expanding on approaches that

emphasize the power of institutions, an examination of approaches that begin with the

individual is made.







5As one scholar suggests, "In fact, combining levels of analysis is necessary, because the
empirical object under study is, in fact, multileveled" (Rothstein 1996:23).








Rational Choice

Rational choice or rational expectations approaches view institutions as the results

of conscious designs by rational individuals. Rational choice in political science is formal

theory first borrowed from work in economics on rational expectations (Lalman,

Oppenheimer and Swistak 1993:77). These assumptions are that "all persons are rational

maximizers of self-interest, calculating the value of alternative goals and acting efficiently

to obtain what they want" (Zuckerman 1991:45). A rational actor may be defined as an

actor making "optimal choices in specified environments" (Nurmi 1998:15). One

problematic aspect of this is that the boundaries of those environments for one person may

differ vastly from the boundaries of another, which means their choices may differ

significantly. A brief summary will clarify the different perceptions of the role of

institutions in the field of economics, and how the concept of rational choice changed

research in other fields.



Rational choice and institutions in neoclassical economics, neoliberalism and the
new institutional economics

Research utilizing a rational choice approach is extremely diverse, ranging "from

free market conservatives to Marxists" (Hauptmann 1996:1). The use of rational choice

originated in economics in response to "the shortcomings of the (traditional) neoclassical

economics paradigm," as a basis for the "New Institutional Economics (NIE)" (Nabli and

Nugent 1989:1333). Neoclassical economics generally took the institutional framework as

a given, and in many cases ignored it altogether (Nabli and Nugent 1989:1335). In

reaction to this, an institutionalist school developed, creating a rough distinction between








classical mainstream / neoclassical economics and work in old / new institutional

economics.

Gruchy (1969) calls institutional economics "dissent." Klein ([1978] 1994), on the

other hand, traces the historical development of institutional economics and argues that

this school does not deserve the title of "mere dissent." The old institutionalist school was

shaped by Thorstein Veblen, John R. Commons, Wesley Mitchell, Clarence Ayres and

other heterodox economists (Gruchy 1969:5-6). Some scholars maintain that early

interest in institutional economics faded, as Scott suggests:

... the early institutional economists did not prevail: Neoclassical theory
was victorious and continues in its dominance up to the present time. Prior
to the rise of the new institutional economics in the 1970s, only a few
economists attempted to carry forward the institutionalist's agenda... (Scott
1995:4-5)

Klein, on the other hand, argues that, "Far from dying out, as some appear to

think, institutionalism must be viewed as either never having died or as being in the

process of a resurrection which I suggest will endure" ([1978] 1994:27). The resurrection

Klein refers to has today become known as the new institutional economics. Klein's

assertion that institutionalism never really died out in one school of economics supports

the notion that the study of institutions is well-established, albeit not mainstream, within

the discipline of economics.

Gruchy distinguishes work by the old institutionalists from that of

neoinstitutionalists such as John Kenneth Galbraith (1967), Gunnar Myrdal (1956),

Adolph Lowe (1965) and others (Gruchy 1969:6). A main distinction between the two

groups was that the neoinstitutionalists were not heavily influenced by Thorstein Veblen,

and the perceived anti-theoretical technological determinism associated with him (Gruchy








1969:6). The new institutional economists attempt to merge theoretical insights from

neoclassical economics with the influence of institutions, to create a more relevant social

science. Both the old and the new institutionalists within economics criticized neoclassical

economics for several reasons:

...the two schools share a strong criticism of neoclassical economics for (a)
its lack of attention to institutions and hence to the relevance and
importance of nonbudgetary constraints, (b) its overemphasis on the
rationality of decision making, (c) its excessive concentration on
equilibrium and statics as opposed to disequilibrium and dynamics, and (d)
its denial that preferences can change or that behavior is repetitive or
habitual. (Nabli and Nugent 1989:1336)

Institutional economists explore a wide range of institutional effects. They might,

for example, detail the inefficiency of state-run organizations, and point out that such

institutions often limit development. For orthodox institutionalists,

the framework of analysis involves an examination of the tensions between
the dynamic force that promotes economic growth and development--
technological progress--and the retarding, past-binding institutions,
socioeconomic structures, and their associated behavior and thinking
patterns--called ceremonialism--that tend to slow technological adaptation
and impede economic development. (Dietz 1995a: 16)

From the perspective of orthodox institutional economics, the inefficiency of many state-

run organizations is widely assumed, and the perseverance of such state institutions

despite reform attempts is therefore seen as a hindrance to development.

There are two general approaches within the new institutional economics: (1)

transaction and information costs, and (2) collective action (Nabli and Nugent 1989:1336-

1337). The transaction cost school grew out of work by Coase (1960) and was followed

by such authors as Williamson (1985) and North (1990). Its adherents argue that

economic performance depends upon the right institutions to lower the costs of

information, coordination and enforcement of contracts (Bardhan 1989:1389).








Neoinstitutionalist Douglass North (1990) adds depth to the discussion of the

influence of institutions on economic development over time by revealing the persistence

of inefficient institutions. His work qualifies the assumptions of the rationality of decision-

making by insisting that the motivations of actors are more complex than usually assumed,

and that the institutional framework limits the set of choices available to them (North

1990:17-26). North's path dependency approach grants significance to a state's

institutional development, which helps to explain why some countries have persistently

poor performance over time.

Collective action approaches, the other general approaches within the new

institutional economics, reveal the free-rider problem, namely, that rational actors will

often choose not to help provide public goods. Olson (1965) and Hardin (1968) founded

this approach theoretically (Nabli and Nugent 1989:1338). Research in this school can

explain how sub-optimal public outcomes come about, as well as to help identify what sort

of institutional framework may assist in the provision of public goods.

The growth of the new institutional economics challenged the traditional

neoclassical economic paradigm. Nonetheless, neoclassical economic theory continued to

influence development policies throughout the 1980s and 1990s. It provided the basis for

the neoliberal policy recommendations being implemented in Latin America in recent

decades. Neoliberals take orthodox perspectives on institutions. They believe that

development will occur through the implementation of macroeconomic stabilization,

structural adjustment and the free flow of international trade and capital. Policy analysts

appear now to be moving away from some of the neoliberal prescriptions originally

recommended for Latin America, in order to pay closer attention to institutional theories








and their concordant policy recommendations. Two recent World Bank publications

(Burki and Perry 1997 and Burki and Perry 1998) make this shift explicitly. The authors

refer specifically to the new institutional economics as the perspective they adopt, and

distinguish it from the neoliberal perspective (which neglected institutional influences) that

was the basis for the Washington Consensus.6

Although the new institutional economics focuses needed attention on significant

institutional phenomena, it is inherently limited by the fundamental assumptions of

rationality which form the basis of their examinations. Nonetheless, the approach was

appealing because it brought a means of conducting research using formal, deductive

methods. The influence of neoinstitutionalists in economics soon had an impact in

scholarly research in other social sciences as well. This extra-disciplinary spread of its

influence is described in the next section.



Rational choice and institutions in political science and other fields

Rational choice approaches have become increasingly popular in political science

and other social sciences. By 1992, rational choice approaches were represented in 40

percent of the articles published in the American Political Science Review, the major

journal for political science (Pfeffer 1997:13). Scholars who recognize the limitations of

this approach should welcome the insights of other theoretical perspectives. Other useful

approaches are being underrepresented in the field of political science.


6 See Burki and Perry 1998:1-2.








Some examples of the leading scholarship applying rational choice theories to

political phenomena are Kenneth Arrow's Social Choice and Individual Values (1963),

James Buchanan and Gordon Tullock's The Calculus of Consent (1962), Anthony

Downs's An Economic Theory of Democracy (1957), Mancur Olson's The Logic of

Collective Action (1965) and William Riker's Liberalism Against Populism (1982).

Rational choice explanations posit that since institutions are created by, altered by and

eliminated by individuals, in order to understand political, economic or social phenomena,

scholars should focus on the motivations, decisions and actions of individuals (Zuckerman

1991).

Put somewhat differently, rational choice theories assert that institutions are for the

most part temporary in nature (Resen 1998). For this reason, the rational choice approach

lacks explanatory power when confronted with institutions that appear to contradict the

desires and plans of rational actors over extended historical periods. Although they

acknowledge that institutions can constrain actions, they have difficulty explaining how

such institutions could continue to affect outcomes. Unnecessary institutions are often

viewed as temporary or insignificant entities in the grand scheme of development policy

implementation. Rational choice institutionalists maintain that individuals should be

motivated to act to eliminate inefficient institutions in order to advance development.

Some of the fundamental problems with the rational choice approach are that:

... [A]n economic conception of choice cannot explain many things about
politics: how people form political allegiances, how they change their
minds about political issues, and why they adopt political positions on
issues that have little bearing on their own personal fortunes. Nor can
rational choice theory capture political situations in which institutions do
not offer citizens a defined range of options from which to choose. In such
situations... the course people take cannot always be easily defined as the








product of a rational choice .... [R]ational choice theorists' particular
conception of choice... is also a central reason why their project to explain
politics in economic terms yields incomplete and distorted results.
(Hauptman 1996:89-90)

The normative implications of the rational choice institutionalist approach are that

the utilitarian standard (which posits that the sum of individual preferences will result in

the common good) creeps back in (Immergut 1998:15). Yet these approaches do not

deny the significance of institutions. Instead, institutions are perceived as capable of

constraining actions (Lalman, Oppenheimer and Swistak 1993:81). A problematic aspect

of one of the foundational premises of rational choice theory is that individual self-interest

may not be completely independent of the interests of others (Lalman, Oppenheimer and

Swistak 1993:97). Raising the issue of the possible interdependence of the interests of

individuals paves the way for deeper questioning of the roles of institutions.

If individuals are interdependent, what does their interdependence mean for their

preference formation? What might influence their choices? The role of institutions is

irrevocably significant. Approaches to political and economic issues that give greater

emphasis to the institutions themselves seem to be required, given these shortcomings of

rational choice approaches. Yet other new institutionalist approaches differ significantly

(Keman 1998:109). The two other main types of new institutionalism are sociological

(organizational) institutionalism and historical institutionalism.

Sociological / Organizational Institutionalism

The study of institutions in sociology experienced popularity beginning in the late

19th century. In recent decades, the resurgence of interest in institutions in other

disciplines has again focused attention on Emile Durkheim (1858-1917) and Max Weber








(1864-1920), whose work heavily influenced the subsequent development of sociological

institutional theories (Scott 1995:9). Sociological institutionalism has been roughly

divided into an "old" and a "new" institutionalism (see, e.g., Selznick 1996; Stinchcombe

1997). The distinction revolves around the extent to which human interactions may be

considered as driven more by self-interested actors or culturally defined procedures, as

explained below.

The two best-known early scholars of economic sociology are Durkheim and

Weber. The two figures had distinct impacts on the field of sociology:

... Durkheim... essentially sought to bring sociological subject matter within
the confines of a positivist methodology. This methodology.., principally
took the view that laws must be subject to the test of fact and thereby
stressed the criterion of observability. Accordingly, most of the
programmatic statements Durkheim made about sociological subject matter
tended to equate sociological events with external regularity and this may
explain Durkheim's use of the claim 'consider social facts as
things'.... Weber's work, on the other hand, emphasized the subjective side
of social action and in this respect knowingly rejected a methodology
which tended to equate social life with external regularities. (Morrison
1990:93)

Weber's impact on economic sociology was to "integrate the idea of interest-driven

behavior with the idea of social behavior in one and the same analysis" (Swedberg

1998:3). Durkheim's impact on the study of institutions provided support for the

exploration of the cultural dependency of human relationships, while Weber's analytical

heritage is a blend of both culturally derived and self-interested behavior.

The heritages of Durkheim and Weber influenced both the old and the new

institutionalism. The old instiutionalists in sociology (like the old institutionalists in

economics) were also shaped by the work of institutional economists such as Veblen and

Commons (Stinchcombe 1997:1). Philip Selznick (1949, 1957) is one prominent example








of the old institutionalist school (Selznick 1996:270; Stinchcombe 1997:1). His work is in

the field of organizational analysis. Selznick explains that,

S.. institutional theory traces the emergence of distinctive forms, processes,
strategies, outlooks, and competences as they emerge from patterns of
organizational interaction and adaptation. Such patterns must be
understood as responses to both internal and external environments.
(Selznick 1996:270)

For Selznick and other old institutionalists, "people built and ran institutions"; this

may be contrasted with the "new Durkheimian institutionalism in which collective

representations operate on their own" (Stinchcombe 1997:1). Unlike work in political

science (and arguably, in economics), institutional theorizing in sociology did not lose

prominence from view during the behavioral revolution. However, when traditional old

institutional sociology came under fire, the growth of neo-institutional sociology began in

the 1980s. Both types of analysis now coexist in the discipline (Scott 1995:57-59). Neo-

institutional sociology, also known as the "new economic sociology," includes work by

scholars such as Neil Fligstein (1990), Mark Granovetter (1992 [1985]) and Viviana

Zelitzer (1992).7

The new institutionalists in sociology should not be pigeon-holed as social

determinists. Nonetheless, these new institutionalists place greater emphasis on the

determinacy of institutions than, for example, the new institutionalists in economics do.8



7 See Swedberg and Granovetter (1992), and Swedberg (1993 and 1998) for detailed
descriptions of work in economic sociology.
8 For example, Koeble explains that,
To the sociologists, institutions are themselves dependent upon larger
'macro level' variables such as society and culture, and the individual is a
largely dependent and rather unimportant variable. The quip that
economists attempt to show how people choose and sociologists try to










The new institutionalists in sociology describe the "embeddedness" of social action and
situations of "bounded rationality." The idea of the embeddedness of social action was

developed by Karl Polyani (1944) and expanded upon by Mark Granovetter (1992 [1985])

/and Powell and DiMaggio (1991) (see Koeble 1995:234). Embeddedness refers to the

human tendency to stick to established routines, thereby affecting political, social, cultural

and economic life, making the idea of rationality absurd (Koeble 1995:235).9 The

embeddedness of social action is an underlying concept in two significant edited volumes

among the new institutionalists in sociology: The Sociology of Economic Life (1992) by

Mark Granovetter and Richard Swedberg, eds., and The New Institutionalism in

Organizational Analysis (1991) by Walter Powell and Paul DiMaggio, eds.

Of special significance to sociological institutionalists are the concepts of bounded

rationality and satisficing developed by organization theorists (Cyert and March 1963;

March and Simon 1958; Simon 1957). Organization theorists challenged the empirical

validity of expectations of rational choice by arguing that members of organizations do not

choose among all possible outcomes, only among certain feasible or simple solutions to

organizational challenges. Rather than making optimal choices, members of organizations

make choices that usually only satisfy their needs. These concepts have proven useful to

many scholars of new institutionalism. Bounded rationality may be defined as "the


show how people do not have choices to make still appears to hold true!
(Koeble 1995:232)
9 Koeble explains that,
Individuals are viewed as 'embedded' in so many social, economic, and
political relationships beyond their control and even cognition that it is
almost absurd to speak of utility-maximizing and rational behavior in a
strictly economic sense. The very concept of rationality is dependent upon
its environment. (Koeble 1995:235)








inability of economic actors to anticipate properly the complex chain of contingencies that

might be relevant to long-term contracts" (Granovetter 1992 [1985]:64).

James March and Johan Olsen (1989) promote the sociological institutionalist

approach by arguing that these and other organizational factors influence political

outcomes. In an earlier piece, they provide three examples of styles of theoretical research

on institutions: "policy martingales," "experiential learning" and "garbage can" models

(March and Olsen 1984:745-746). Research on policy martingales seeks to reveal the

influence of chance in determining historical paths of development. Experiential learning

models expose how organizational learning influences future success, and how standard

operating procedures might interfere with optimal outcomes. Garbage can models

demonstrate the streams of influence flowing through organizations, with problems and

solutions joining spontaneously, or never coming together at all.

The work of sociologists Michael Hannan and John Freeman (1989) on

organizational ecology also examines the relevance of the historical development of

institutions. They provide evidence that the historical conditions present during the birth

and growth of institutions profoundly influence their future. In reference to this point,

Hannan and Freeman describe the strong influence of the work of Arthur Stinchcombe on

their own theoretical development. They explain that Stinchcombe (1965),

...suggested that cohorts of organizations are 'imprinted' with the social,
cultural, and technical features that are common in the environment when
the cohort is founded. Because imprinted characteristics are highly
resistant to change, the current characteristics of populations of
organizations reflect historical conditions at the time of founding rather
than recent adaptations. (Hannan and Freeman 1989: xiii)








Hannan and Freeman reveal the significance of this "imprinting" on a variety of

institutions.

These ideas from sociological institutionalism also found their way into scholarship

in political science. Dan Cochran is a political scientist who discusses the historical

imprinting of institutions and the impact of institutions on development. He describes the

relationship between an institutionalized regime and organizations, maintaining that a

regime creates,

... regularized patterns of interaction that maintain people in relatively
consistent relations over time. It must structure behavior.., through
creating rules, beliefs, and relationships, many of which will be fostered by
and expressed through formal organizations. (Cochran 1994:18)

Cochran stresses the importance of institutionalization over the simple creation of

(weakly- or non-institutionalized) organizations in service to the state.

Rothstein (1996) similarly highlights the impact of organizational history on future

performance. He relates that,

As with other institutions, organizations may be viewed as 'frozen
ideologies.' The norms, meanings, and goals which at one time had
furnished the reasons for establishing them remain embedded in the
organization long after these reasons have vanished. Organizations, as
other institutional arrangements, tend thus to a certain stickiness (March
and Olsen 1989; cf. Shepsle 1989). When an organization is established,
then, it is endowed with certain values, norms, repertoires, standard
operating procedures, etc., which will be very difficult to change in the
future (Jelinek et al. 1983; Olsen 1983; Selznick 1949, 10). (Rothstein
1996: 35-36)

The significance of "frozen ideologies" and institutional "stickiness" is discussed further in

the chapters that follow.

In sum, the old sociological institutionalism left some theoretical space for

individual rationality, although it emphasized many limits on rationality. The newer








sociological institutionalism, on the other hand, places so much emphasis on the limits to

rationality that it rejects the possibility that the sum of individual preferences will result in

the common good (Immergut 1998:15). This is similar to research on collective action in

the new institutional economics, which argues that rational actors will not always choose

to provide public goods. The development of institutional theories in sociology may be

viewed as a mirror image of the development of neoclassical economic ideas (Swedberg

1991: 22).

If one respects the intellectual acumen of scholars in each of these academic fields,

how is one to decipher the pendulum-swings in the acceptance of differing views of

institutions over time and across disciplines? Are the formal models of the economists

preferable due to their ability to distinguish the influence of the individual in social

modeling? Or are Durkheimian deterministic models of the new institutionalists in

sociology more useful since they unearth the impossibility of rational choice under a great

variety of common situations? Ostrom's (1995) Resen's (1998) and Rothstein's (1996)

arguments in favor of scholars working at different levels provide good resolution to this

apparent dilemma.

The institutional theorizing in political science known as historical institutionalism

helps to further resolve these issues. This perspective is best for the present institutional

study. As explained earlier, the insights from other perspectives will also fortify the

analysis on various occasions, especially when it pushes the limits of middle-level

(institutional, neither deterministic nor individualistic) analysis.








Historical Institutionalism

The new historical institutionalist school within political science is likened to the

old sociological institutionalism of scholars such as Selznick (1949) (Koeble 1995:236).

The contributions of Weber, and to a lesser extent, Durkheim, also influence historical

institutionalists. Institutionalist approaches vary in the significance they grant to the

influence of institutions on an economy, polity or society, but historical institutionalism

grants relatively more autonomous power to institutions than rational choice theories do.

It lends explanations that emphasize the legacies of institutions during development

processes (e.g., Hattam 1993; Immergut 1992; Rothstein 1992 and 1996; Thelen and

Steinmo 1992). On the other hand, it stops short of suggesting that institutions vapidly

determine social outcomes.

The perspective of historical institutionalism is not always explicitly referred to by

scholars. Thelen and Steinmo (1992) provide a clear outline of this body of theory,

distinguishing it from and comparing it to the work of new political economists of the

rational choice school. Historical institutionalists focus on the importance of institutions

in forming and informing individuals' choices, and how institutions in existence for long

historical periods can be very influential in shaping the thoughts of individuals (Thelen and

Steinmo 1992). Thus, the institutions that make up a particular environment over time

may have a more significant impact on development than the individuals living within that

environment at any one given time.

Historical institutionalization is the way that institutions take shape over time.

Institutions which have existed for decades are more entrenched, and thus more resistant

to change than newer institutions. Some state institutions may continue to function as








they have in the past, or in ways that reflect their historical development, rather than in a

reformed way advocated by current policies. Institutions with a long and significant

history may have a very different impact than newer institutions during a period of

reforms. Alternatively, new institutions may claim critical space.

Growth of historical institutionalism

Historical institutionalism, like other forms of new institutionalism, grew out of a

critique of the behavioralism of the 1950s and 1960s. Although some scholars did focus

on institutions during this earlier period, an enlivened debate about the role of the state

and its institutions was forged in the late 1970s and 1980s by scholars such as Peter Hall,

Peter Katzenstein, Theda Skocpol and Alfred Stepan. 10 These scholars emphasized the

significance of the state, state institutions and state-society relations in political economy.

Stepan, for example, describes a lack of institutionalization by the Peruvian

military regime from 1968-1975 (Stepan 1978:291-292). He defines institutionalization as

follows:

Institutionalization is a distinct process from that of installation and is not
just a matter of longevity. Institutionalization implies that a regime has
consolidated the new political patterns of succession, control, and
participation; has managed to establish a viable pattern of economic
accumulation; has forged extensive constituencies for its rule; and has
created a significant degree of..'hegemonic acceptance' in civil society. It
also implies that the majority of the weighty political actors in the polity are
pursuing strategies to further their positions within the new institutional

10 See Peter Hall, Governing the Economy: The Politics of State Intervention in Britain
and France (New York: Oxford University Press, 1986); Peter Katzenstein, Between
Power and Plenty (Madison: University of Wisconsin, 1978); Theda Skocpol, "Bringing
the State Back In: Strategies of Analysis in Current Research, in Peter B. Evens,
Dietrich Rueschmeyer and Theda Skocpol, eds., Bringing the State Back In (Cambridge:
Cambridge University Press, 1985) and Alfred Stepan The State and Society: Peru in
Comparative Perspective (Princeton, NJ: Princeton University Press, 1978). See Thelen
and Steinmo (1992) for a summary of the development of historical institutionalism.








framework, rather than directing their energies to resisting, eroding or
terminating that framework. (Stepan 1978:292)

By defining institutionalization in this fashion, Stepan emphasizes the autonomous power a

regime may possess: it is capable of "control," establishes patterns and forges

constituencies. He draws attention to the role of institutionalization (i.e., the construction

of rules) in political-economic life.

Skocpol (1985) similarly emphasizes the role of the state in political-economy.

Like other historical institutionalists, she usually approaches the study of her subject

matter in an inductive manner. Skocpol, in "Why I am a Historical Institutionalist

(1995)," explains that in her 1992 book, 1 the patterns she tries to explain came to her

attention through "empirical rummaging, not theorizing" (Skocpol 1995:104). Similarly,

Thelen and Steinmo explain that,

Rather than deducing hypotheses on the basis of global assumptions and
prior to the analysis, historical institutionalists generally develop their
hypotheses more inductively, in the course of interpreting the empirical
material itself The more inductive approach of historical institutionalists
reflects a different approach to the study of politics that essentially rejects
the idea that political behavior can be analyzed with the same techniques
that may be useful in economics. (Thelen and Steinmo 1992:12)

The unearthing of the evidence for this study of institutional impacts during the

implementation of neoliberal reforms similarly contributed in an inductive fashion to the

construction of subsequent hypotheses about institutional significance. The historical

institutional perspective provides the best support for both the qualitative examination and

the sub-national level of analysis used here.



11 Theda Skocpol, Protecting Soldiers and Mothers: The Political Origins of Social Policy
in the United States (Cambridge: Cambridge University Press, 1992).








Themes of historical institutionalism

What sorts of evidence do historical institutionalists uncover? The work of

historical institutionalists is diverse, with three prominent themes: "preference

construction /political construction of interests," "contextual causality" and "contingent

development" (Immergut 1998:20). Within each of these three types, some theorists'

approaches are more structural and some are more interpretive (Immergut 1998). Each of

these three themes is reviewed in order to reveal what types of things historical

institutionalists work on, and to better compare this type of approach to the other new

institutionalist approaches discussed above.

Historical institutionalists who work on the political construction of interests do

not claim that "norms dictate to actors what should be their behavior," but rather, that,

Instead, institutions-be they the formal rules of political arenas, channels
of communication, language codes, or the logics of strategic situations-
act as filters that selectively favor particular interpretations either of the
goals toward which political actors strive or of the best means to achieve
these ends. (Immergut 1998:20, emphasis added)

By understanding that institutions act as filters, historical institutionalists emphasize the

ways that they influence outcomes. This serves as a response to the criticism of non-

institutionalists who argue that institutions do not have the capacity for autonomous

influence besides that originating in the organization's membership. This type of analysis

parallels work by sociological institutionalists on "experiential learning" described earlier.

Historical institutionalists also examine the contextual logics of causality, that is,

they "tend to see complex configurations of factors as being causally significant"

(Immergut 1998: 22,19). This means that the historical circumstances are important, and








makes generalization challenging, yet not impossible. Institutions are seen as providing v/

the contexts in which individuals make decisions:

Mental constructs, economic and social institutions, and politics interact to
channel economic development along different paths, for instance, without
one necessarily being able to determine which of these elements is causally
primary or even to know whether the same combination would produce the
same results if repeated at a later point in time. (Immergut 1998:19)

The examination of the path dependency of development by historical institutionalists is

similar to the work of neoinstitutionalist Douglass North (1990) as well as the work on

policy martingales among sociological institutionalists. The similarities between different

types of neoinstitutionalists are highlighted by this example. These path dependency

approaches do have subtle differences: North's neoinstitutionalism begins with (qualified)

assumptions about the behavior of individuals, sociological institutionalism begins with

assumptions about the role of institutions, and historical institutionalists are eclectic, using

either a calculus approach or a cultural approach (Hall and Taylor 1996:939-940). 12

A third theme common in the work of historical institutionalists is that of

contingent development. By emphasizing the fortuitousness of political, economic and

social development, historical institutionalists are able to reveal how irrational outcomes

often come to pass. They show the difficulties of predicting future events with certainty:

Our understanding of particular events and developments is constrained by
the large role played by chance. Quirks of fate are responsible for
accidental combinations of factors that may nevertheless have lasting
effects. In addition, self-conscious political actors... can divert the
supposedly ineluctable march of progress onto unexpected paths.
(Immergut 1998:19)


12 According to a calculus approach, institutions provide actors with information that
affects their choices, whereas according to a cultural approach, individuals are seen as
satisficers who follow routines (Hall and Taylor 1996:939).








This theme in historical institutionalists' study of contingent development also resembles

the sociological institutionalist research on "policy martingales," as well as that on

"garbage cans."

These three themes have many areas of overlap and scholars often articulate

several of them in a single piece of work. Skocpol's research emphasizes the

contingencies of development (Immergut 1998:24), yet there are elements of the other

themes in her work as well. Skocpol adopts what she calls a "polity-centered approach,"

which draws attention to four types of processes:

One, the establishment and transformation of state and party organizations
through which politicians pursue policy initiatives. Two, the effects of
political institutions and procedures as well as social changes and
institutions on the identities, goals, and capacities of social groups that
become involved in politics. Three, the fit or lack thereof between the
goals and capacities of various politically active groups and the historically
changing points of access and leverage allowed by a nation's political
institutions. And four, the ways in which previously established social
policies affect subsequent policies over time. (Skocpol 1995:105)

The first two processes fit the thematic category of the political construction of interests,

the third process approximates the theme of the contingency of development, and the

fourth process roughly matches the theme of the contextual causality. The examination of

the impacts of state institutions in Mexico (see Chapters 5 and 6) highlights similar

processes as those mentioned by Skocpol and draws attention to all three themes

described by Immergut. The relevant variables in historical institutionalist analyses are the /

institutions themselves. Institutions influence decision-making, thereby impacting social,

economic and political development.








Policy Implementation Literature


This review of a broad spectrum of institutional perspectives has revealed some

similarities and differences in institutional approaches in a number of fields and across

time. Obviously, no such brief review could hope to really do justice to the vast literatures

that expound on the ideas of the leading figures in various theoretical areas. The goal,

rather, was to show the utility of institutional approaches, and to relate the perspective on

institutions used here to the work of others. Yet there is an important literature that has

thus far been excluded from the discussion, namely, the study of policy implementation.

Policy implementation is one of many approaches within the field of public

administration. The study of public administration was distinguished from the study of

politics by Woodrow Wilson in "The Study of Administration" (1887), and this dichotomy

has influenced research on adminstration and politics through the present time (Kettl

1993:407). Scholars regret that the divide between the two fields leaves each one

incomplete, and maintain that we should attempt to link them to overcome this problem

(see, e.g., Katznelson 1998:196; Kettl 1993:408).

The present research examines the impact of institutions on the implementation of

neoliberal reforms. Literature on policy implementation addresses the problems that arise

when instituting policies. Since the implementation of neoliberal reforms seemed to be

heavily influenced by political, institutional and bureaucratic factors, the institutionalist

approach will be supplemented with insights from the study of policy implementation. The

reason for doing so is to try to overcome some of the shortcomings that result when the

study of administration is divorced from the study of politics.








Policy implementation literature examines "the compatibility between a given

policy and the specific state organization responsible for implementing it" (Rothstein

1996:21). Studies of implementation stem from a Madisonian tradition in American

politics; this tradition is "wary about too much governmental action, and they are cautious

about the concentration of governmental-especially administrative-power" (Kettl

1993:407). The study of policy implementation was formalized with the publication of

research by Jeffrey Pressman and Aaron Wildavksy (1973). 13 Pressman and Wildavsky

explain that,

The study of implementation requires understanding that apparently simple
sequences of events depend on complex chains of reciprocal interaction.
Hence, each part of the chain must be built with the others in view. The
separation of policy design from implementation is fatal. It is no better
than mindless implementation without a sense of direction. (Pressman and
Wildavsky 1979 [1973]:xxiii)

Implementation studies focus on the program as the unit of analysis rather than the /

organization, as other types of public administration studies do (Kettl 1993:413).

The study of policy implementation evolved through three stages following the

publication of the pioneering work by Pressman and Wildavsky (1973) (Kettl 1993). In

the first stage, from 1973 through the mid- 1 980s, implementation literature focused on

government failure (Kettl 1993:414). The second stage literature argued that policy

implementation success was possible but context dependent (Kettl 1993:414). This stage

shares characteristics with the historical institutionalist literature emphasizing contextual

causality. Like the contextualists of historical institutionalism, these analysts had difficulty



13 Pressman, Jeffrey and Aaron Wildavsky (1979[1973]) Implementation: Or How Great
Expectations in Washington are Dashed Out in Oakland, 2nd ed., Berkeley and Los
Angeles: University of California Press.








in generalizing their findings. The most recent stage of policy implementation literature

examines in a more integrated fashion which conditions produce which type of results

(Kettl 1993:415).

Although the literature on policy implementation is useful when combined with the

insights of other types of analyses, on its own it suffers from certain shortcomings.

Implementational analysis lacks attention to the origins of power:

The problem with implementational analysis... is its myopic view of the
organizational problem and, more specifically, its failure to address more
general questions of the configuration of political power and social
structure in capitalist societies. (Rothstein 1996:31)

The micro-level of analysis of policy implementation studies can thus best be used as a

complement to mid- and macro-level approaches. Hall (1992) describes these three levels

of viewing politics. 14

Rothstein (1996) links these different levels of analysis in his examination of the

limits of political reformism in Sweden, revealing how different levels of analysis, ranging

from the macro- to the micro-level, can be used to study reformism. State theories, such

as theories addressing the relationship between state and society, are pertinent at the

macro-level (Rothstein 1996:21). At the mid-level and micro-level, institutional theory (or

organization theory) and implementation theory are appropriate (Rothstein 1996:21).

Both Rothstein (1996) and Hall (1992) combine insights from each perspective to form an

analysis that is solid and textured.


14 Rothstein (1996) differentiates, for example, between the (macro-) "overarching level"
of a market economy with a democratic polity, the mid-level organization of the national
political economy such as labor union organization, the structure of firms, party system
organization, etc., and the lowest level, namely, the standard operating procedures of
public and private organizations.








The conceptual linking between levels of analysis suggested by scholars such as

Hall and Rothstein works well for the present analysis as well. These macro- and micro-

level analyses can be linked in a similar manner. From a macro-level, state-society

relations are described as corporatist, that is, the state has a relationship with vertically

organized societal groups that is defined by varying degrees of power and compromise.

Corporatist concepts about the relations between state and society "explain the

administrative structure and capacity of the state" and they are "visible in the patterns and

behavior of specific state apparatuses" (Rothstein 1996:33). In discussing empirical

details, reference is made to the impacts of "corporatist institutions" of the state (see

Chapters 5 and 6). This draws attention to the impact of macro-level structures (such as

the corporatist organization of state-society relations) upon more mid-level and micro-

level structures and processes. For the mid-level of analysis, a historical institutionalist

approach is taken. Useful micro-level analysis is found in the study of policy

implementation.

A variety of insights from the study of policy implementation will add to the

interpretation of the empirical subject matter of this study at the micro-level. The capacity

to implement policies depends upon the legitimacy of the agency in charge of

implementation:

The very process of implementation can be the critical question, especially
if the policy takers are an organized interest group whose participation is
needed for successful implementation. One way of achieving this
legitimacy is to grant such groups semiofficial status (and not merely in
policy formulation, but also in implementation. (Rothstein 1996:37)

This explains how some groups become affiliated to the state, and subsequently impact the

success or failure of state policies. Thus incorporation may be used as a means of aiding








the successful implementation of policies. By contrast, then, alienating previously

incorporated groups might limit the success of new policies. This point becomes

significant when examining the relationship between political and economic liberalization,

as described in subsequent chapters. Although neoliberalism might call for alienating

certain privileged groups (in pursuit of political liberalization), the overall success of

implementing the reforms may sometimes (though not always) rely upon retaining

corporatist ties to key interest groups.

Another insight gained from the study of policy implementation is the relationship

between old agencies and new policies. Unless a new policy is similar to traditional

policies, a pre-existing organization will have difficulty implementing it, because it will

have to change its self-image as well as its traditional client groups in order to succeed

(Rothstein 1996:38-39). New agencies, by contrast, will have an easier time implementing

new policies. Similarly, the "ideological orientation and professional norms of the

bureaucratic staff' are important (Rothstein 1996:39). These themes gain significance

during the empirical discussions in Chapters 5 and 6.

Conclusion


The theoretical perspectives considered above address the impact of institutions

and agents on development policy implementation. The significance granted to institutions

per se varies considerably. For the present study, a historical institutionalist perspective

will provide the most meaningful insight into the outcomes of the implementation of

neoliberal development policies. By examining institutional context and institutional








power, the linkages between past, current and future developments are revealed and

insights are gained into whether new policy designs will result in their desired outcomes.

The need for research like this on institutions is succinctly described by

sociologists Hannan and Freeman:

We have expressed reservations about the power of efficiency in dictating
change in the world of organizations. Although we recognize that
considerations of efficiency have powerful consequences for many kinds of
organizations, we feel that they do not obviously override institutional and
political considerations. .... Theory and research that address these
connections are sorely needed. (Hannan and Freeman 1989: 339)

To better understand the interactions between the international, national, and

subnational influences on development, the present research will examine the impact of

institutions primarily from a mid-level of analysis using a historical institutionalist

perspective. Where neoliberal reforms fall short of their intended goals, the impact of

institutions on the implementation of reforms is studied. Historical institutions of the state

are shown to have significant impact on the speed and depth of reforms. Various

institutional perspectives are synthesized where analytically possible and logical,

emphasizing the strengths of those most applicable to the present examination. 15

The historical institutionalist approach used here begins with assumptions about

institutions. The analysis is also supplemented with insights from the macro-level of state-

society relations. Corporatist state-society relations create patterns of behavior visible in

state institutions. Micro-level analyses revealing how the beliefs of agents affect policy

implementation also bolsters the examination. For example, in Chapter 6, an explanation




15 See Rothstein (1996:23) for a defense of a similar approach linking Marxist analysis,
historical institutionalism and policy implementation approaches.






47


is provided as to how the beliefs of ejidatarios interact with the influence of ejidos during

the implementation of ejidal reforms. The tension between the neoliberal demand for

efficiency expressed explicitly at the national and international levels, and the reality of

political and institutional power at the subnational level will be exposed.














CHAPTER 3
STATE INSTITUTIONAL POWER DURING THE IMPLEMENTATION OF
NEOLIBERAL POLICIES IN LATIN AMERICA


This chapter provides a general discussion of the role of state institutions in Latin

America since the Great Depression. This historical perspective of the role of state

institutions moves through various development phases: from a discussion of import

substitution industrialization (ISI) through the crisis of the populist state and the spread of

neoliberal reforms. The goals of neoliberal reforms are examined and evidence of the

contraction of state institutions in the economic sector is presented. Yet the speed and

extent of the implementation of neoliberal reforms continues to lag behind original

expectations. This chapter begins to challenge the notion that certain neoliberal reforms

will soon achieve their goals, by pointing to noteworthy flaws that arise during their

implementation.

During the transformation to more neoliberal policies, some period of lingering

inefficient, weak and even contradictory policies is not surprising. Despite the

transformations of structural adjustment and liberalization, do some historical institutions

of the populist state continue to have an unexpectedly strong influence? Do other

institutions, although sharply curtailed by reforms, nonetheless leave heritages that

moderate the neoliberal project in a myriad of ways? Evidence of such institutional

"stickiness" will be considered, and the extensiveness and durability of such influences will

be further examined.








These questions delve into the meaning of the historical roles of both formal and

informal state institutions under the neoliberal project. Much literature from the 1980s

and through the mid-1990s presents the neoliberal project as one that will change (or is in

the process of changing) the role of state institutions quite rapidly under the strength of

neoliberal pressures. 1 However, at the turn of the 21' century, some analysts are

proposing a different outcome in the balance between state institutions and the market,

one that foresees the continuation of a very important role for the Latin American state in

national development.2

Beyond the question of whether some state institutions that contradict neoliberal

policy goals continue to thrive are other relevant questions. Are new institutions being

created to fulfill the informal commitments that the populist state has historically kept,

despite the fact that their new mandates essentially undermine parts of the neoliberal

project? Similarly, are older institutions being reborn with new names but identical

mandates?

This chapter will shed light on these questions by examining the status of the

reforms in a cross-section of Latin America. It argues that institutional phenomena limit

the successful implementation of neoliberal reforms. A historical institutionalist approach

provides the framework for this examination of development during the implementation of

neoliberal reforms in Latin America. The historical imprinting of institutions discussed by

Hannan and Freeman suggests a partial explanation for the abundance of state institutions



I See, for example, Bergsten and Williamson (1994), Bhagwati (1991), Morales (1993),
Smith and Acufia (1993).
2 For a discussion, see Burki and Perry (1998) and Bradford (1994).








deemed inefficient and / or inappropriate during the 1980s and 1990s in Latin America.

As will be discussed, historical imprinting is conspicuous on both formal and informal

institutions and affects the attempt to reform them. The applicability of a historical

institutionalist perspective to the present study is clarified using this general discussion

about Latin American state institutions as a starting ground. This chapter sets the stage

for a case study of one Latin American state (Mexico) to shed more light on the role of

institutions during neoliberal reforms.

Latin American Development Strategies and Institutional Heritage


Prior to the Great Depression, Latin America was heavily dependent on exports

for its economic growth. A succession of balance-of-payments crises resulted in a critical

rethinking of the conventional belief in the benefits of free trade, and the adoption of a

new growth strategy in the region (Dietz 1995a:9). The Great Depression had isolated

world markets, creating incentives for the development of domestic industries. The new

growth strategy was embodied in the ISI model of development.

ISI could be either horizontal or vertical (Dietz 1995a:9,10). Horizontal, or "easy"

ISI emphasized the "domestic production of simple, nondurable, manufactured consumer

goods-furniture, textiles, glassware, beverages and so on-to replace those being

imported" (Dietz 1995a:9). This type of ISI was especially popular as early as the 1930s,

and during this period many of the bureaucratic agencies of the state began to grow in

Latin America. In the creation of these institutions of public administration, European

concepts of public administration were matched with United States (U.S.) techniques such

as scientific management and other technical administrative skills (Graham 1990:35-36).








The characteristics of formal institutions were imprinted even earlier than is readily

apparent upon first examination (Graham 1990).3 After the 1930s, the involvement of the

state in development grew rapidly.

In the early decades of horizontal ISI, the region enjoyed a growth in

industrialization, but the strategy had inherent limitations, since domestic markets were

limited (Dietz 1995a: 10). At this time, the scholarship of Ra6l Prebisch, the first director

of the United Nations Economic Commission for Latin America (ECLA) gained

significance.4 In the 1940s, Prebisch formulated a concept of "unequal exchange" in the

trade relations between developed countries at the "center" of the world economy and

developing countries at the "periphery" (Prebisch 1950). According to Prebisch, the

countries that industrialized first enjoy an advantage that is perpetuated over time.5

Peripheral countries supply raw materials to central countries at ever deteriorating terms

of trade. According to this hypothesis, the world economic system is characterized by a

hegemonic relationship of the center over the periphery. To break this hegemony, price

protections for primary products were necessary along with rapid industrialization of the

periphery (Love 1995[1980]:1 12).

In an effort to break out of this relationship, after World War Two the second

stage of lSI, vertical ISI, had begun (Dietz 1995a: 10). Vertical ISI was adopted by larger



3 For the case of Mexico, which has had a very stable political system since the Mexican
Revolution in the early 20th century, state institutions are organized and operate in ways
that often reveal roots predating World War Two.
4 The name of the ECLA was later changed to the Economic Commission for Latin
America and the Caribbean (ECLAC).
5 For a discussion, see Ocampo (1995 [1993]).








countries (Argentina, Brazil, Chile and Mexico), to encourage the production of

intermediate and capital goods (Dietz 1995a: 10). Many formal state institutions became

more heavily involved in the economy at this time. Formal and informal state institutions

created during the period were thus imprinted with characteristics suited to the ISI model.

For example, corporatist and clientelist institutions rewarded particular groups and

individuals that were instrumental in promoting industrialization. Some of these

institutions were more adaptable to the changing needs of states over the decades, while

others stagnated in their original functions.

As vertical ISI policies continued during the 1950s and 1960s, ECLA and the

World Bank encouraged development planning, and the Alliance for Progress6 urged

agrarian and tax reforms (Gerchunoff and Torre 1992: 259). The state's ability to

intervene in national development to the extent that it did during the era of import

substitution attests to the enormous capacities of the state in Latin America at the time. In

order to direct the economy, the Latin American state:

--invested heavily in the kind of infrastructure required by industry, such as
new roads, water and electricity supplies;

--kept labour costs down in urban areas by subsidizing basic foods and
imposing price controls

--protected local industries against foreign competition by imposing import
taxes and 'non-tariff barriers' such as import quotas;





6 The Alliance for Progress was a U.S. assistance program for Latin America implemented
by the Organization of American States which ran from 1961 to 1973. Goals included the
reduction of poverty, increased social equity, economic and social planning as well as anti-
communism. Commitment to the Alliance was lacking both in the U.S. and in Latin
America.








--nationalized key industries such as oil, utilities and iron and steel, and
established new ones. This produced a large state sector, intended to play
a leading role in developing the economy;

--supported an overvalued exchange rate, making Latin America's exports
expensive and imports cheap. This hurt exports, but helped industry by
reducing the price of imported machinery and inputs, while tariff and non-
tariff barriers ensured that the relative cheapness of imports did not
undercut their products. An overvalued exchange rate also kept inflation
down by ensuring cheaper imports. (Green 1995:16-17)

This enormous role for the state came under attack under neoliberalism. The ISI model

contained some inherent economic flaws.7 These flaws were the focus of growing

criticism from the 1970s onward. In the 1990s, such state-led development policies may

appear to have been overly reliant on political, rather than economic, incentives to

development. Given the strength of the current neoliberal consensus, such plans today are

discarded as recipes for stunted national development in the long term.

What was the actual result of the application of this advice? Conclusions vary

depending upon the observer. Evidence shows that in terms of economic growth, post- ,7

World War Two performance was in fact quite remarkable (Teitel 1992). As one analyst

acclaims, "During the period 1950-80, Latin America's gross domestic product (GDP)

increased at an average yearly compounded rate of 5.5 percent, a performance not

significantly surpassed by any other group of countries--developed or developing" (Teitel



7 The inherent economic flaws have been elaborated by Dietz:
Latin America's model of growth and development... depended for its
dynamic on a relatively small proportion of the domestic population with
sufficient disposable income to purchase the output of the promoted
industries, an output often of lower quality and higher price than the
foreign substitutes suppressed by the high tariff barriers of ISI. The
inherent growth limits of this strategy as a motor of development, absent a
more equitable distribution of income, are indisputable. (Dietz 1995a: 11)








1992:356). The diversification of Latin American economies and the creation ofjobs and

income that resulted from the use of ISI has also been lauded (Alexander 1995

[1990]:165). For example, ISI policies developed textile industries throughout the region

(Alexander (1995 [1990]:164). Economic indicators for Latin America and the Caribbean

(from 1950 through 1997) are shown in Table One. Table One reveals that both overall

GDP growth rates and per capita GDP growth rates during the decades of ISI compare

favorably with the corresponding growth rates of the decades of neoliberal reforms.

The development of Latin American markets during the period since 1950 may be

compared to the development of United States markets between 1870 and 1910, one of

the most dynamic experiences in worldwide capitalist development (Tokman



Table One: Latin America and the Caribbean: Economic Indicators by Decade
since 1950
(In percentages)

Decade Leading Economic GDP Growth Inflation Foreign Trade
Development Model Overall Per capita Exports Imports
of the Decade Annual rates of variation
1950-1959 ISI 4.9 2.1 17.8 4.0 3.2
1960-1969 ISI 5.7 2.8 21.6 4.5 4.1
1970-1979 ISI 5.6 3.1 37.9 2.6 7.8
1980-1989 Neoliberal 1.7 -0.4 203.4 5.4 0.0
1990-1997 Neoliberal 3.2 1.4 160.7 9.1 14.2


Source: Economic Survey of Latin America and the Caribbean 1997-1998, United
Nations, Santiago, Chile, 1998, pp. 346, 350, 355, 360, 365.








1993:131).8 Employment absorption in modem nonagricultural sectors grew rapidly in

each area. In Latin America between 1950 and 1980 growth in employment in modern

nonagricultural sectors was 4.1 percent per year (with manufacturing reaching 3.5 percent

per year), whereas in the U.S., employment in modem nonagricultural sectors grew at 4.4

percent per year between 1870 and 1910 (Tokman 1993:131).

Critics of the ISI period often point to the lack of development in industry/

manufacturing sectors. Yet the comparison with a similar period of development in the

United States reveals that Latin America is not as unique as is sometimes believed

(Tokman 1993). The development of employment in the manufacturing sector was

actually similar in some ways to the earlier experience of the United States,

Between 1950 and 1980 employment in the secondary sector in Latin
America declined from 42 percent to 39 percent of the nonagricultural
labor force. Between 1870 and 1900 secondary employment in the United
States dropped from 50 percent to 48 percent. This means that the decline
of secondary employment, as well as the sharpness of this drop, is not
peculiar to Latin America, as believed in the past (ECLA 1966). (Tokman
1993: 132)

Scholars who do criticize the economic development of the period argue that the

gains during the decades of the 1950s and 1960s came at the expense of future

competitiveness of the region during the 1970s and 1980s.9 As Table One has shown, a



8 A similar type of comparison of some Latin American countries during the 1960s to the
United States during the 1880s is also made by Merkx (1991). The percentage of the
population employed by the primary sector (basically agriculture) is around 50 percent for
Brazil, Mexico and Peru during 1960 and for the United States during 1880 (Merkx
1991:159).
9 For example, Deepak Lal argues that among large debtors, especially in Latin America,
the domestic problems these countries face in raising the requisite
resources for debt service and converting them into foreign exchange... are
due to their endemic fiscal problems and dirigiste trade control systems that








sharp downturn in overall GDP growth occurred in the 1980s, with a negative per capita

change in growth for the region as a whole. Critics maintain that several decades of lSI

created nationally-subsidized industries that were inefficient and could not compete

internationally, and that such industrial growth created short-term gains at the expense of

long-term prosperity and economic stability. Politically, they argue, ISI empowered

sectors and individuals close to the ruling party, thus undermining the development of

democratic politics throughout the region. The impact of this historical period is still

being experienced. With the hindsight of the late 1990s, the shortcomings of the period of

ISI development seem in significance to be matched by the shortcomings of the neoliberal

reforms that followed.

The Latin American populist state took a variety of forms in the post-World War

Two era. Despite variety in the style of governmental leadership, in general the state was

fairly strong and active, taking responsibility for national economic development through

ISI policies. The assessment of institutionalized political capacity is relevant to the

evaluation of development in the region at the time.

State capacity includes many features. State capabilities are the basic

administrative and coercive functions of the modem state (Mauceri 1995:10). Three

arenas of state power exist: "the state's own organizational structure, the state's ability to

influence the behavior of societal actors, and the state's relation with other states and

supra-state actors" (Mauceri 1995:10-11). A variety of indicators of state power exist,

including: state administrative presence; the ability to regulate the economy and administer



have created repressed and inflexible economies. (Lal 1994:199 [Reprinted
from Lal in Barry and Goodin, eds., 1992.])








state economic resources via fiscal and monetary policies (e.g., taxation); administrative

autonomy; public enterprises; regulatory agencies; state capacity to maintain and repair

basic infrastructure (such as transportation, communication and energy networks); human

infrastructure; state bureaucracy; the ability to reshape society (e.g., via agrarian reform);

a system of corporatist organizations to encourage societal participation (Mauceri cites

SINAMOS, a Peruvian state agency designed to support social movements); the ability of

a state to repress challenges to its power; and the ability of a state to maintain a strong

position internationally (e.g., to avoid having international lending agencies dictate

domestic policies) (Mauceri 1995:11-15). Although these indicators are not quantified,

this list provides a way of thinking about the institutionalization of the political capacity of

the Latin American state.

To complete the definition of institutionalized political capacity, informal

institutions must also explicitly be encompassed, since informally institutionalized

interactions are common in Latin America. Institutionalized political capacity thus refers

to the consolidation of control through both formal and informal means. The definition of

institutionalization provided by Stepan (1978) is relevant here, as discussed in Chapter 2.

A regime has institutionalized political capacity if its goals are supported by formal

institutions such as laws, regulations and contracts, as well as informal institutions such as

trust, ethics / values and political norms (Burki and Perry 1998:12). The strengths of both

formal and informal institutional political capacity in many Latin American countries make

them important factors to consider in any study of development policies in the region.

During the ISI period, Latin American institutionalized political capacity

strengthened considerably. The state nationalized key industries, gaining control over vast








resources. Latin American states distributed these resources in a populist fashion over

several decades. These states strengthened their corporatist and clientelist ties with

organized groups and influential individuals. In Mexico, for example, the state used

import licensing and the licensing of interest groups to gain governmental control, and the

state mushroomed. The ISI period created state institutions for power over the

distribution of permits, tariffs, rules and regulations. The number of public servants grew,

and the state eventually generated approximately one-third of national economic activity

(Grayson 1998:29).

Although it is difficult to generalize about the extent of state institutional capacity

in Latin America because of national diversity, by the 1970s, many Latin American states

had penetrated society and had well-developed coercive and administrative infrastructures

(Grindle 1994:307). A number of Latin American states experienced military coups

during the 1960s and 1970s, but these new military regimes in Argentina, Brazil, Chile,

Peru and Uruguay were more institutionalized than earlier personalistic military regimes.

They were labeled "bureaucratic-authoritarian" states (O'Donnell 1973). Other states,

such as Colombia, Costa Rica and Venezuela did not experience military coups. In these

states, organized labor was incorporated through the political party system (Wiarda

1995b:75). Among both bureaucratic-authoritarian and more liberal regimes in Latin

America, institutionalized political capacity during the period of ISI may be compared

positively to that of other developing areas at the time. 10


10 For example, in Africa at the time, on the other hand, the political capacity of the
postcolonial state was weak. In general, African states had a bloated administration but
few deep connections with society. One reason for the distinction is the African states'
lack of resources when compared to their Latin American counterparts.








In terms of social performance the development picture is also somewhat clouded,

since the determination of social indicators of development is also quite subjective. Little

consensus exists over which indicators are most important, data from any developing area

are subject to serious shortcomings in terms of reliability and older historical data are

fraught with even more deficiencies. Nonetheless, the customary portrayal of Latin

American social development during the 1950s through the 1980s is overly dour (Teitel

1992). If one examines such indicators as life expectancy, nutrition, adult literacy,

university or tertiary education and others, Latin America's social development under the

ISI period ranks better than or similar to other developing areas (Teitel 1992: 360).

Social indicators such as life expectancy, infant mortality and illiteracy rates show

positive changes during the ISI period (Lustig 1993:69). Despite structural flaws in Latin

American economies, "although in different and unfair proportions, major social sectors

managed to improve their living standards during the whole postwar period until the

1980s" (Sunkel 1993:41). During the 1960s the proportion of households below the

poverty line declined (Lustig 1993:668-69). Latin American schooling and nutrition also

improved during the ISI era (Lustig 1993:69-70).

In sum, the period of state-led development in Latin America coincided with high /

rates of GDP growth and average or better than average social development when

compared with other developing areas (Alexander 1995 [1990]; Brachet-Marquez 1994;

Grindle 1994; Lustig 1993; Sunkel 1993; Teitel 1992). Given that the assessments of

development in Latin America in the decades following World War Two are varied and

frequently quite positive, why did so much of the region switch its overarching

development model during the 1980s? What factors led to these broad policy shifts?








The answer for Latin America may best be understood with the aid of a historical

perspective on economic development after the 1960s, particularly in viewing the

difficulties which came to light in 1981/1982 with the onset of the debt crisis. The ISI

model began to falter after the 1960s, when many of the most obvious substitutions had

already been accomplished (Alexander 1995:159). Yet even during the years following the

first oil shock in 1973, many countries borrowed heavily, enjoying low interest rates on

loans for development.

As early as the 1970s, a consensus about the importance of market-oriented

reforms was growing ( Vald6s-Ugalde 1996:57). With the onset of the second oil shock

in 1979, however, credit tightened and free-floating interest rates soared. 1I Latin

American states continued to borrow despite the high interest rates attached to loans.

This continued until 1982, when Mexico declared a moratorium on its debt payments.

Credit became completely unavailable, forcing Mexico and other Latin American states to

cut spending in response to the demands of Bretton Woods lending institutions. To

qualify for the receipt of loans from the IMF and the World Bank, states had to adopt

economic stabilization programs followed by structural adjustment programs (SAPs).

Neoliberal policies were the recommended solution to the economic problems faced by

Latin America and other developing areas, as explained below.

The Spread of Neoliberalism


Latin America's apparent widespread acceptance of neoliberal national

development policies (beginning with Chile in the 1970s) represents a major switch from


11 For a discussion, see Teitel (1992).








its state-led development policies implemented after the Great Depression. In the early

1980s structural adjustment programs brought pressure to reform many state institutions.

The size and number of state institutions has already been cut and / or is still being cut in

many countries.

As introduced briefly in Chapter 1, neoliberal recommendations included adjusting

domestic economies, reducing barriers to free trade and slashing the involvement of the

state in the economy. Neoliberal theories advocated fundamental changes in the roles of

state and market. Dietz critically summarizes the neoliberal perspective as "the apparent

generalized... assertion that state intervention into the economic sphere is by nature

inefficient and incapable of positively contributing to the development project" (Dietz

1995b: 192). His criticism is harsh, and may be valid for only a handful of the most

extreme neoliberals, but it does capture the spirit of the strongest critics of the Latin

American populist state. After the debt crisis, neoliberal views gained force and ISI lost

credibility:

The consensus post mortem view held the whole complex of import-
substitutions policies responsible for what was essentially a crisis of
overspending exacerbated by the fickleness of international capital markets.
It became commonplace to view the debt crisis as the consequence of
import-substitution ('inward-oiented') policies. The intellectual ground
was therefore cleared for the wholesale reform of prevailing policies in
Latin America, Africa, and Asia. Orthodox economists who had the ear of
policy makers now had their chance to wipe the slate clean and mount a
frontal attack on the entire range of policies in use. (Rodrik 1996:16-17)

The fall of the Iron Curtain and the breakup of the Soviet Union in the late 1980s and

early 1990s added further support to the idea that the market is far better suited to drive

an economy than is the state. The expectations were that the change in state influence

would cut the incidence of corruption and other non-democratic practices, since economic








assistance would not be tied to partisan or clientelistic relations with certain sectors or

firms. Neoliberal views were prominent in the United States government, the U.S. Federal

Reserve Board, and the IMF and the World Bank (Nazmi 1996:5).

Neoliberal ideals were embodied in what became known as the "Washington

Consensus." 12 The "Washington Consensus" was formally identified following a 1990

conference sponsored by the Institute for International Economics in Washington, DC.

The conference gathered together "a group of Latin American and Caribbean (LAC)

policy-makers, representatives of international agencies, and members of academic and

'think-tank' communities" (Burki and Perry 1998:1). In response to development needs at

the time, "Washington" had reached consensus on the following policy instruments: (1)

fiscal discipline; (2) public expenditure priorities; (3) tax reform; (4) financial

liberalization; (5) free exchange rates; (6) trade liberalization; (7) direct foreign

investment; (8) privatization; (9) deregulation; and (10) property rights (Williamson

1990). These ten recommendations are sometimes referred to as the "ten commandments"

(Nazmi 1996:6).

To what extent did these neoliberals underemphasize the significance of

institutions? With the perspective of around a decade of policy reforms according to

neoliberal (Washington Consensus) ideals, two World Bank discussion papers13 conclude




12 Economist Nazmi also uses the Washington Consensus to identify neoliberal policy
recommendations (Nazmi 1996:5).
13 See Shahid Javed Burki and Guillermo E. Perry, (1998) Beyond the Washington
Consensus: Institutions Matter, Washington, DC: World Bank, Latin American and
Caribbean Studies Viewpoints Series; and Shahid Javed Burki and Guillermo E. Perry,
(1997) The Long March: A Reform Agenda for Latin America and the Caribbean in the








that institutions matter more to development outcomes than originally assumed. They

rightly note that,

With but one exception (namely, the protection of property rights) the
policy prescriptions of the "Washington Consensus" ignored the potential
role that changes in institutions could play in accelerating the economic and
social development of the region... (Burki and Perry 1998:1)

The Washington Consensus generally neglected the myriad ways that institutions affect

the implementation of neoliberal reforms, be they positive or negative for development.

State institutions were generally perceived as limits on reforms that could be overcome in

the short term. The Washington Consensus viewed institutions more as hindrances to

development than as entities that might decelerate and distort neoliberal reforms.

Through the mid-1990s, neoliberals were confident about the eventual outcome of

their policies. In 1994, the mood of policy-makers and investors in Latin America was

very positive; Burki and Perry explain that, "Doubters and skeptics were a small minority

and their voices were drowned out by the crescendo of the alleluia" (Burki and Perry

1997:ix). This changed significantly after the Mexican peso crisis of December 1994,

which threatened investors in other parts of Latin America and other developing areas as

well.

In The Long March (1997), Burki and Perry provide a detailed analysis of the

recent status of reforms in Latin America, as well as a reform agenda for Latin America

for the next decade. They refer to "first generation" and "second generation" neoliberal


Next Decade, Washington, DC: World Bank, Latin American and Caribbean Studies
Viewpoints Series.








reforms, and explain that following the implementation of first generation reforms

(through the late 1990s),

... there is now a general awareness among policymakers that additional
reforms need to be undertaken if LAC economies are to grow more than 6
percent a year... Policy makers also believe that many of the reforms
vaguely referred to as 'second generation' reforms are different from, and
more problematic than, the 'first generation' reforms. (Burki and Perry
1997:x)

The second generation of reforms moves beyond the neoliberal reform goals of the

Washington Consensus. Reform goals now include a deeper attention to the potential

contributions of institutions to the reform process. As the same authors summarize in

Beyond the Washington Consensus: Institutions Matter (1998):

The Long March concluded, then, that further reforms were needed to
achieve higher sustained rates of growth and to make a more significant
dent in poverty reduction. It identified, in particular, the need to focus on
improving the quality of investments in human development, promoting the
development of sound and efficient financial markets, enhancing the legal
and regulatory environment (in particular, deregulating labor markets and
improving regulations for private investment in infrastructure and social
services), improving the quality of the public sector... and consolidating the
gains in macroeconomic stability through fiscal strengthening. The report
showed that such reforms would entail considerable 'institutional' reforms.
(Burki and Perry 1998:1-2)

Thus the second generation of reforms involves attention to institutions previously

left out of first generation reforms. Indeed, the Washington Consensus did not anticipate

that the role of institutions would prove to be so significant to the resolution of

development problems. This has been a fundamental flaw in its implications for

development. Neoliberal theories about development have tended to overlook potentially

significant institutional effects. In later chapters (5 and 6), state labor and agrarian

institutions, public sector institutions and other types of institutions mentioned by Burki








and Perry are discussed, to show how they have impacted the implementation of neoliberal

reforms.

Neoliberals have also been focused disproportionately on economic growth as a

desired outcome. Burki and Perry explain that:

The expectation, however, was not only that globalization and the 'first-
generation' reforms would raise economic growth rates, but that they also
would significantly reduce poverty and inequality. Indeed, capital inflows
and export growth were expected to promote the development of labor-
intensive sectors. This has not occurred. (Burki and Perry 1998:1)

Hence, in the search for a deeper understanding of development problems and possible

solutions in Latin America, neoliberal policies appear to have misread both: (1) the

potential persistence of state institutions which may hinder neoliberal reforms, and (2)

the potentially negative development outcomes that could occur if, as a result, neoliberal

reforms were implemented in a distorted fashion. Before turning to an investigation of the

role of institutions during the implementation of neoliberal reforms, a general evaluation of

the success of neoliberal reforms in the achieving their objectives is provided. The

remainder of this chapter examines evidence from a variety of sources on Latin America.

The Emphasis on Change in Literature about Neoliberal Reforms


Much of the literature about neoliberal reforms in Latin America highlights

elements of change at the expense of a more balanced presentation of both continuity and

change during the period of reforms. For example, Edwards (1995), like many other

scholars, puts great emphasis on aspects of change during this period. 14 He explains that


14 See for example, Andr6 Lara Resende, Moderator, Policies for Growth: The Latin
American Experience (1995); Guillermo Perry and Ana Maria Herrera, Public Finances,
Stabilization and Structural Reform in Latin America (1994); Jorge A. Lawton, Ed.,








early neoliberal reforms were numerous, and groups 22 Latin American countries as "early

reformers, second-wave reformers, third-wave reformers, and nonreformers" (Edwards

1995:8). 15 Within each wave, "reformers" move through phases of initiation,

implementation and consolidation (as described by Haggard and Kaufman 1992) (Edwards

1995:9). By denominating countries as "reformers," he implies that elements of change

are the defining characteristics of the development arena in these countries (Edwards

1995).

Edwards summarizes the status of neoliberal reforms in Latin America in a way

that exemplifies the literature highlighting elements of change. He reiterates the attitudes

of many analysts, noting that,

The Latin American reforms of the 1980s and early 1990s are impressive.
Most countries opened up their economies to international competition,
implemented major stabilization programs, and privatized a large number of
state-owned firms. Toward mid-1993, analysts and the international media
were hailing the market-oriented reforms as a success and proclaiming that
some Latin American countries were on the way to becoming a new
generation of 'tigers.' (Edwards 1995:6)

Perhaps one of the most emphatic claims about reforms bulldozing preexisting

institutions is found in a recent examination of Bolivia (Toranzo Roca 1996). In this

chapter, Toranzo Roca argues that neoliberal reforms not only changed economic policies

but also transformed political thinking and historical beliefs:

The New Economic Politics approved of in August 1985 was also the
beginning of a new strict programme of structural adjustment, and it also

Privatization Amidst Poverty (1994); Carlos F. Toranzo Roca (1996) "Bolivia: Crisis,
Structural Adjustment and Democracy," in Alex E. Fernindez Jilberto and Andr6
Mommen, eds., Liberalization in the Developing World: Institutional and Economic
Changes in Latin America Africa and Asia, London and New York: Routledge.
15 "Nonreformers" include the Dominican Republic, Ecuador and Haiti (Edwards
1995:7).








turned into the first phase of the structural reforms which changed the
orientation of the economy: Much more than all that, and surpassing the
categorical scaffolding used by the international financing organizations,
one could assert that with these new economic politics the societal
organization of the country was being redesigned and, simultaneously, that
its politics, the state, the political system and its articulation with the
political actors would be redefined.

The New Economic Politics... caused political and ideological
transformation as well, because it had the capacity to change the old
political concepts ... the old categories of the syndicalist and left-wing
radicalism were exorcised from the peoples' minds. (Toranzo Roca
1996:166-167)

Toranzo Roca argues that the Bolivian public was ready for a new ideology after the

failure of previous economic policies (Toranzo Roca 1996:166). Yet he leaves the reader

with no sense of the other side of the development picture, namely, whether any elements

have remained unchanged, and if so, the reasons for their continuity. (Further discussion

of the Bolivian case appears in the next section.)

Another powerful example of work emphasizing elements of change rather than

continuity is Roberts and Araujo's The Capitalist Revolution in Latin America (1997).

The authors declare,

As the twentieth century enters its final years, Latin America is enveloped
in tumultuous change. Countries that had for decades relied on socialist
development planning and inward-looking protectionist policies privatized,
deregulated, and opened their economies to global trade .... [T]he new
political leaders burned their bridges to the old order.... From Mexico to
Argentina, governments subjected themselves to standards of truth,
morality, and justice, elevating the rights of the individual over privileges
that had been seized by the state. The outcome of the reforms is a rebirth
in all areas of life: economic, political, social, and spiritual. (Roberts and
Araujo 1997: 10)

Their emphasis on change leads them to overstate the speed and extent of reforms to date.

By describing changes as "burned bridges" and "rebirths," they cast aside possible impacts








of institutional continuities. Indeed, they discuss institutions only in the context of

institutional change, in reference to the contributions of Douglass North (1990). 16

They argue that the "arrival of capitalism in Latin America" is a time of fundamental

changes to the institutional milieu. Yet while they dismiss the old order as irrelevant, they

cannot deny the possibility that it might once again prove influential. Roberts and Araujo

warn:

If Latin American reforms do not maintain their momentum, then the
natural inclination is for the old order to re-infect the system with rent-
seeking forms of behavior, permitting privilege to supplant the market as
the allocator of resources. (Roberts and Araujo 1997:7)

It is reasonable to note that if the old order can return, it must still exist. Rather than

dismissing it, it is better to discuss the ways that institutionalized interactions may remain

influential, perhaps through informal means.

Other scholars use language that is less slanted, yet similarly overlook continuities

through their focus on change. As an example, Sautter explains that,

... economic policies presently pursued in Peru and other Latin American
countries can only be observed with amazement. Old populist recipes are
being rejected. A very orthodox policy of budget discipline is pursued, and
the liberalization of markets is demanded today just as vehemently as it was
rejected before. A dramatic 180 turnaround in the economic order is
taking place. (Sautter 1993:10)

Likewise, Green aims to show "the all-encompassing nature of the transformation under

way in Latin America" (Green 1995:8). Although it is natural that scholars describe

changes as they occur, this has frequently been done at the expense of more balanced

evaluations of the development picture in Latin America.


16 Roberts and Araujo explain that, "As North emphasizes, the path of institutional
change determines the level of economic opportunity in a society. This book is about








Other scholars make similar omissions when analyzing the Mexican case in

particular. 17 For example, Loaeza (1996) argues that in the 1980s, Mexican political

institutions were weakened. Likewise, Otero (1996) argues that a Mexican anti-poverty

program created during the neoliberal reform period undermines old corporatist

institutions. Teichman (1996) aims to demonstrate that neoliberal reforms have severely

undermined the corporatist-clientelist relations of Mexico's traditional political structure.

This is another reason Mexico is a good case for further study, since it provides a window

for determining to what extent observers of neoliberal reforms tend to overemphasize

elements of change while neglecting significant institutional continuities.

Much scholarship about the period of neoliberal reforms has tended to emphasize

elements of change rather than continuity (e.g., Edwards 1995; Loaeza 1996; Otero 1996;

Toranzo Roca 1996; Roberts and Araujo 1997; Teichman 1996). Other literature presents

a picture of the other side of the coin, of the continuities that endure the changes, as

discussed in the next section. The authors suggest greater continuity in Latin American

political-economic systems than implied by a great deal of the current literature.

Evidence of Continuity due to Institutions during Reforms


Despite the growth of literature documenting the downsizing of the Latin

American state, and its assumed positive implications for Latin American development, a


these societal transformations" (Roberts and Araujo 1997:6).
17 For examples of scholarship emphasizing change in the Mexican case, see Pedro Aspe,
Economic Transformation the Mexican Way (1993), Wayne A. Cornelius, Mexican
Politics in Transition: the Breakdown of a One-Party Dominant Regime, (1996), Wayne
Cornelius, Ann L. Craig and Jonathan Fox, eds., Transforming State-Society Relations in
Mexico: The National Solidarity Strategy, Stephen Morris, Political Reformism in Mexico:
An Overview of Contemporary Mexican Politics (1995).








smaller parallel literature challenges these claims. In an early example of this perspective,

Graham reviews the history of the growth of the Latin American state and the origins of

pressure to "reduce the size of the public sector, to limit public expenditures, and to

improve performance" (Graham 1990:17). He concludes, however, that, "concrete results

to date [ 1990] in the implementation of these policy priorities have been ...meager..."

(Graham 1990:17). He argues that by 1990 only Chile, and to a much lesser extent,

Mexico had implemented privatization policies. Instead, he describes the policy dilemmas

in the region:

... [F]or example in Brazil, Mexico, and Peru... stasis also abounds.... [T]he
size of national indebtedness and the international pressures to continue to
service that debt have placed all governments in the region under
tremendous pressure. In such a setting, while policy alternatives continue
to be discussed, there has yet to be constructive dialogue around the issue
of how to arrive at policies that can respond to the needs of the
international financial community, can be defended internally and publicly,
and can mediate effectively between internal and external pressures.
(Graham 1990: 18)

During this period of uncertainty and international pressures, the development

policies implemented throughout Latin America were characterized by a high degree of

variation both among and within individual states. Yet as the 1990s progressed, the

selection of national development policies became more homogenous throughout Latin

America, and even globally, as neoliberalism gained in popularity. The pressures to

reform the state sector grew stronger.

Since international financial institutions make the availability of loans dependent

upon the acceptance of neoliberal development policies, governments resort to the use of

a variety of methods to demonstrate that their public agendas comply with these

requirements. Maneuvering at the national and subnational levels is used to address








international pressures. It has been in Latin American governments' best interests to

advance the view that neoliberal reforms have been extensively and successfully applied,

and that any newly formed formal institutions do not demonstrate the characteristics that

led their predecessors to be discarded. External pressures are lessened in part through the

(internationally-broadcast) public acceptance by national policy makers of neoliberal

reforms.

Despite the increase in neoliberal rhetoric during the 1980s, neoliberal reforms

tended to lag behind. During the 1990s, neoliberal reforms did deepen and become more

widespread. Nonetheless, even Edwards (who frequently emphasizes change during this

period) admits that as of 1995, only in

Chile and Argentina, [were] the reforms... already bearing fruit in the form
of accelerated growth, rapid improvements in productivity, and higher
wages. Other countries-Ecuador, Nicaragua, and Peru-however, only
initiated the implementation stage in the early 1990s, while a small group,
of which Brazil is the most prominent case, had barely taken the first steps
on the reform path by early 1993. (Edwards 1995:9)

In the 1990s the literature documenting the decline of the Latin American state grew, and

the voices of different interpretations of Latin American political economy were heard less

frequently. Yet contradictions still existed between publicly pronounced national

development policy goals and the actual policies subsequently being implemented in many

cases (Manzetti 1994:44).

Institutionalized interactions have significant effects on development during

neoliberal reforms (Grindle 1996). The plans theorized by economists came up

against the realities of the institutional context of different countries (Grindle








1996). 18 This institutional context includes both historical traditions (informal

institutions) and the role of the state (formal institutions).

Grindle (1996) examines in detail the cases of Mexico and Kenya. She explains

that, "ultimately, the problems of effective delivery of social services and physical

infrastructure reflect the training, motivation, and organization of public officials in large

bureaucracies..." (Grindle 1996:128). Her work provides support for the notion that the

role of the state in the 1990s depends to a large extent upon its historical

institutionalization and a capable technocratic elite backed by political power of reformist

orientation. Thus the implementation of neoliberal reforms depends heavily on national

institutional heritage.

There are many discrepancies between the predicted and actual outcomes of

neoliberal policies. With the hindsight of the mid-1990s, scholars such as Burki and

Edwards (1996a and 1996b), Cavarozzi (1994), Dornbusch and Edwards (1995), Frediani

(1996) and Manzetti (1994) draw conclusions similar to those of Graham (1990) and

Grindle (1996). For example, Cavarozzi argues that the reduction of the role of the state

in Latin America is somewhat misstated:



18 Grindle explains that the 1980s and early 1990s were a time which,
...encouraged critical rethinking about appropriate functions of the state.
...Economists debated what the state ought to do in terms of definitions of
public goods, market failures, and the comparative advantages of states and
markets, while others considered what functions were central to the social
contract between state and society. In practice, of course, theoretical
debates about what the state ought to be responsible for were adjusted to
the historical traditions of specific countries, the economic and political
strength and composition of the private sector in each country, and the
political convenience of destatization in individual countries. (Grindle
1996:128)








... the replacement of the state-centric model with an alternative matrix
organized around market logic is still far from complete even in those cases
where the process has advanced most decisively, as in Chile, and to a lesser
extent, in Argentina and Mexico. In any event, the change should be seen
as consisting of overlapping elements of decline (linked to the
disorganization of the state-centric matrix), on the one hand, and of
elements of creation related to the reorganization of social behavior on the
basis of a different set of principles, on the other. (Cavarozzi 1994:129)

This more mixed outcome better characterizes the new political economy of Latin

America than a more purely neoliberal label.

Dornbusch and Edwards (1995) similarly determine that neoliberal reforms are not

showing the anticipated results. They reveal, for example, that, "Even though structural

reforms appear to be a necessary condition for growth, they are not a sufficient

one"(Dornbusch and Edwards, 1995:1). Dornbusch and Edwards reach this conclusion

after examining evidence that in some countries, such as Bolivia, "growth has continued to

be shy even years after the completion of the basic adjustment program" (Dornbusch and

Edwards 1995:1). To investigate the cause of this slow growth, scholars should examine

more closely the effects of both formal and informal institutions on the implementation of

neoliberal reforms. One important reason why structural reforms do not always lead to

their desired effects is that informal institutions play a role in hindering successful

implementation. The process of reform does achieve its full potential as a result.

Ram6n 0. Frediani supplies a useful analysis of the comparative success of

neoliberal reforms in Latin America. His study, Planes de Estabilizaci6n Y Reforma

Estructural en America Latina: Una Sintesis [Stabilization Plans and Structural Reform in

Latin America: A Synthesis] 1996), ranks eight Latin American countries on their success

at achieving the stabilization and structural reform objectives pursued through November








of 1995 (Frediani 1996:78). 19 Included in these scores are such institutional factors as

reforms of the state, privatizations, central bank independence and fiscal reforms.

Frediani's results are summarized in Table Two.

Frediani's rankings are somewhat imperfect, but they do represent a valiant effort

at quantifying qualitative data for comparative purposes. The points scale (0 to 4) is fairly

straightforward, although it may at times be difficult to say with certainty whether, for

example, a particular reform is at an "intermediate" or "advanced" stage. Other aspects of

his ranking that are more open to challenge are the thirteen chosen categories that he

weights equally. Some critics might consider progress in one category to be of far greater

and / or more enduring significance than change in another category (e.g., should "fiscal

deficit" or "central bank independence" really be considered of equal importance to

"economic growth?"). On the other hand, other scholars might appreciate his attempt to

evaluate the success of reforms without overemphasizing economic growth. His use of

thirteen different categories for each of eight countries provides a fairly appropriate idea

of the big picture comparing the performance of reforms. Even Frediani himself warns

that these rankings are simply meant to provide "an approximation of the evaluation of the

problem and to permit learning a global visualization about the degree of success or failure

achieved by the performance of the new paradigm [neoliberalism] in each of the 8

countries analyzed" (Frediani 1996:79).






19 The book synthesizes and brings up to date the results of a 1993 CIEDLA series on
"Stabilization and Structural Reform" in each of the same eight Latin American countries
(see Frediani 1996:5).





75


Frediani's ranking of Bolivia's success with reforms adds insight into the above
comments of Dornbusch and Edwards. Frediani also describes Bolivia's growth as
very Table Two: One analysis of selected Latin American countries' success with
neoliberal reforms (see Frediani 1996:78). 20

Order Country Points achieved Maximum points Percentage of success


1st Chile 50 52 96%


2 d Argentina 38 52 73%

3rd Peru 32 52 58%


4th Bolivia 28 52 54%


5th Mexico 24 52 46%


6th Brazil 19 52 37%


7th Uruguay 17 52 33%


8th Venezuela 15 52 29%





20 The point totals are from 13 different categories, each with a minimum of 0 points and
a maximum of 4 points for each category. The categories are grouped into the
performance of structural reforms (privatizations, state reforms, external openness and
market regulation), stability and monetary-fiscal order (price stability, central bank
independence, international reserves and bank reforms), performance in fiscal politics
(fiscal deficit, fiscal reform, fiscal evasion and fiscal equality) and economic growth. The
points scale is as follows: 0 points = the political reforms have either not begun or are in a
planning stage; I point = actions have been initiated; 2 points = intermediate stage; 3
points = advanced stage; 4 points: the culmination of the process (see Frediani 1996:100-
101). "Economic growth" is a ranking that roughly rates annual growth rates of gross
domestic product, with Mexico's -7% rate receiving a score of"I" for growth, and Chile's
7% rate receiving a score of"4" for growth (using data from 1995) (see Frediani 1996:79
and 101).








poor during the 1985 to 1995 period (Frediani 1996:20-21). Even when the economic

growth rate reached 4.2% (in 1995), the country's population growth of 2.5% had a

neutralizing effect on the overall impact of this growth for Bolivia.21

A glance at the status of Bolivian reforms supports the hypothesis that the first

generation of neoliberal reforms was easier than the ones left to accomplish, and that

institutional reforms take longer than other types of structural reforms (Burki and Perry

1998). Frediani allows for a maximum of 4 points on each of 4 aspects of structural

reforms: privatizations, state reforms, external openness and market regulation, for a

possible total of 16 points. Bolivia receives a score of 7 out of 16 possible points for

successful structural reform according to Frediani (1996:101). Chile, by contrast, receives

a score of 15 out of 16 points (ibid.). Bolivia receives a high score of 3 points (on a scale

of 0 to 4, where 4 represents a completed reform process) on external openness (Frediani

1996: 101). Within the subcategory of state reforms, on the other hand, Bolivia receives

only 1 point, and only 2 points for market deregulation (Frediani 1996:101). This

supports the hypothesis that first generation reforms (in this case, opening the economy to

trade, investment and financial flows) are more likely to have occurred than second

generation institutional reforms (since the other aspects of structural reforms received

scores of only 1 or 2) (Frediani 1996: 101).

Frediani's scores and rankings suggest that many Latin American countries still

have a long way to go before achieving the goals anticipated through neoliberal reforms.



21 Bolivia's growth in per capita GDP as a percentage of constant prices grew at a rate of
only 0.7 percent on average from 1987-1992, 1.7 percent in 1991 and 1.3 percent in 1992
(see Sebastian 1995:7).








This appears quite significant when one considers that the reforms had been a national

focus for more than a decade at the time the study was conducted. Other scholars have

reached similar conclusions about the success of neoliberal reforms (e.g., Burki and

Edwards 1996a, Burki and Perry 1997 and 1998; Cavarozzi 1994; Graham 1990;

Savastano 1995).

Some neoliberals have begun to speculate on the potential backlash that the lack of

progress of neoliberal reforms could create (e.g., Burki and Edwards 1996a; Morrow

1998). Burki and Edwards, for example, note with great concern that,

The Latin American recovery is proceeding at a slower pace than was
anticipated by most analysts, ourselves included.

The slow recovery of the regional economies is troublesome for a
number of economic, social and political reasons. In many countries,
modest economic performance over the last few years is generating
impatience and a sense of disappointment with the reform process. An
increasing number of people are disillusioned and beginning to look at
policy alternatives. Although this disenchantment has not been translated
into an activist 'anti-reform' movement, it is slowly generating 'reform-
skepticism.' What makes this particularly disturbing is that the reform-
skeptics do not have a coherent plan and tend to offer an assortment of
mutually inconsistent policies with an unmistakable populist flavor. (Burki
and Edwards 1996a:2)

The discrepancy between the anticipated dates for successful completion of

neoliberal reforms and the realities of current delays must be understood more clearly.

The consequences of failing to rapidly and completely implement the remaining reforms

and realize the anticipated economic goals could have dire consequences. In order to

understand the source of some of these delays, closer examination of one Latin American

case will provide significant insight. Perhaps the most representative case is the case of

Mexico. Mexico is considered one of the strictest followers of neoliberal reforms, and yet,

the success of the reforms is still lacking (Edwards 1995; Frediani 1996; Savastano 1995).








Savastano, for example, calls Mexico's growth performance "far from spectacular," and

criticizes the "sluggish response of output" (Savastano 1995:51). He believes the

transition ought to move more quickly in order to be considered successful. This concurs

with Frediani's evaluation of Mexico's growth. Frediani calculates that Mexican growth is

only in the initiation stages, in fact lagging behind the performance of all seven other

countries he examines.22 Thus the case of Mexico will provide an excellent window for

the examination of the impact of institutional factors on the implementation of neoliberal

reforms.

Conclusion


In summary, the anticipated reductions in state institutional power by many

analysts in general have apparently been (and continue to be) overly ambitious. The

ensuing documentations of reductions in state institutional power are also often

overstated. At the same time, the views of institutional economists, historical

institutionalists and others have been smothered under the avalanche of a growing (and

rather uncritical) acceptance of neoliberalism in the late 1980s and most of the 1990s.

Theoretical arguments about the role of institutional factors are muted amidst

claims that development depends mainly on economic growth, with politics and public

policies being of secondary importance. National processes, including the role of

institutions in the implementation of neoliberal reforms, have been neglected in many

recent analyses of Latin American development. Some relevant exceptions to this trend


22 Frediani ranks the other countries growth as follows on his scale from 0 to 4 (see
preceding footnote): Chile: 4; Argentina and Peru: 3; Bolivia, Brazil, Uruguay and
Venezuela: 2; and Mexico: I (Frediani 1996:101).








are appearing, as some scholars (and even the IMF) begin to discuss the need for a second

generation of reforms. For example, Burki and Edwards maintain that it is imperative that

the neoliberal reform process now be "broadened to new spheres, including disassembling

the remains of the old populist structures..." (Burki and Edwards 1996a:4).

To delve more deeply into the effects of institutions on Latin American countries,

an examination of the Mexican case will be provided. Chapter 4 consists of a historical

introduction, and Chapters 5 and 6 analyze of the role of institutions during neoliberal

reforms. This close-up of state institutional effects will highlight the myriad of ways in

which institutions hinder, moderate and distort the neoliberal project.















CHAPTER 4
CASE BACKGROUND: THE HISTORY OF THE INSTITUTIONALIZATION OF
THE MEXICAN STATE


A case study of Mexico will provide a window through which to view the impact

of institutions. Although the Mexican case is somewhat singular, it will nonetheless yield

insights that suggest trends in other states. This chapter will discuss relevant historical

features that affect the institutional composition of modern Mexico.

How will the examination of a single case provide us with insights to formulate

broader hypotheses about Latin American development or development of industrializing

countries in general? Many scholars speak of the uniqueness of Mexico within Latin

America. For example, its shared border with the United States has at times helped and at

other times hindered its development. 1 Mexico's large size and oil reserves also

differentiate it from many other Latin American countries. These unique geographical

features are matched by political and social characteristics that are also somewhat distinct



1 The U.S. is today Mexico's largest trading partner, yet relations between the two
neighbors have not always been peaceful. The Mexican American War (1846-1848),
fought over the U.S. annexation of Texas, ended with the Treaty of Guadalupe-Hidalgo,
by which half of Mexico's national territory became what is now the southwestern U.S.
Mexico's nationalization of its oil reserves in 1938 upset the U.S., and remains an issue in
trade discussions between the two. On January 1, 1994, the North American Free Trade
Agreement (NAFTA) went into effect, initiating a free trade area between the U.S.,
Mexico and Canada. (The effects of NAFTA are discussed further in Chapter 6.) For
discussion of U.S.-Mexican relations see e.g., Bailey and Aguayo, eds. 1996; Cecefia
1970, Handelman 1997:143-173, Rich and de los Reyes, eds., 1997.








from other areas in Latin America, as discussed in this chapter. These distinctions

strengthen the present analysis rather than interfering with generalization.

A focus on the Mexican case is useful precisely because the formal and informal

institutions of the state have a long history of stability. Unlike other Latin American cases,

Mexico has a political regime that has endured for 70 years without suffering a coup d'6tat

or even a change in the status of the ruling party. It thus provides an excellent window for

examining the role of institutions during a variety of economic phases, including periods of

rapid economic change or crisis. Other cases in Latin America also provide evidence of

the types of institutional effects revealed in this case, albeit often on a lesser scale. By

studying the influence of institutions in Mexico, we uncover likely effects institutions

elsewhere might be having. The aim is to demonstrate the effects institutions may have, in

order to animate other scholars and policy makers to take their potential impacts seriously

when considering development issues.

To examine state institutional power in Mexico, one must first be familiar with the

character of the Mexican state. The brief background that follows provides a sketch of

important historical factors relevant to this institutional study. Like many institutions in

Latin America, institutions of the Mexican state are the result of centuries of influence,

invasion and repression by the Spanish; association, assimilation and cohabitation between

races; and revolution and cohabitation among peasant, worker and elite classes. The

historical antecedents of modern institutions are sometimes apparent and sometimes more

obscure.

The 20h century began with a revolution against the dictatorship of Porfirio Diaz,

who reigned from 1876 to 1910. The porfiriato (as this period of authoritarian rule is








called) was characterized by limited political unrest and a greatly reduced foreign debt, but

also by extremely high infant mortality and low life expectancies (Cumberland 1968:190-

191). Railroads and mining expanded, but illiteracy was at about 90 percent (Handelman

1997:11). Fraudulent land surveying practices created huge haciendas for a small wealthy

minority while impoverished campesinos made no progress in the acquisition of lands, and

even lost control over the lands they did cultivate (Cumberland 1968:201). By 1900, 97%

of the fertile land in Mexico was held by 1% of the population; meanwhile 82% of the

rural population was landless (Warnock 1995:22). Foreign investment soared, as

economic policies favored external actors, especially Americans, over Mexican citizens.

By 1910, two-thirds of Mexico's investment came from abroad (Hellman 1978:2). The

Revolution began as a result of discontent by a wide array of actors in this social milieu.

The discussion of the historical influences that follows is limited to post-

Revolutionary phenomena, since the most significant effects visible today are the result of

changes since the Mexican Revolution.2 Many formal and informal institutions of the

Mexican state were shaped by events that occurred in the aftermath of the Revolution. By

understanding the historical significance of their foundations, it is easier to make sense of

institutional continuities that shape the present and the future in Mexico.






2 Frank Tannenbaum explains that "The government, the constitutional system, the army,
the courts, the landholding system, peonage, and many things besides were swept away by
the revolutionary tide" (Tannenbaum 1964:vii). Given this vast social and political
change, the institutional heritage surviving this upheaval was limited, and the remnants of
influence retained have since been withered by time, reform and efforts at modernization.
Although this heritage is not entirely irrelevant to the present discussion, further
examination of these phenomena are most appropriately reserved for another study.








The Institutional Heritage of the Mexican Revolution


Volumes have been written about the causes and consequences of the Mexican

Revolution.3 Scholarship on the Revolution may be grouped into orthodox and revisionist

literatures. Orthodox works common until the 1970s and 1980s describe the Revolution

as a successful social uprising that benefited the peasantry.4 Revisionist scholars, on the

other hand, describe the Revolution as a power struggle among elites that did little to alter

the fate of the masses.5 Joseph and Nugent (1994a) suggest a postrevisionist synthesis of

orthodox and revisionist approaches. A postrevisionist approach attempts to mesh top-

down analysis with bottom-up analysis to better portray the complexity of interactions

between elites, popular groups and institutions. This type of analysis provides a more

balanced summary of the Revolution than either orthodox or revisionist scholarship.

The Revolution was fought by citizens with differing motives and varied

aspirations for the future of the state. Citizens' grievances included disdain for policies

privileging foreigners, unhappiness with electoral fraud and unlimited presidential

reelections and disputes over economic policies that impoverished huge sectors of

peasants and workers. The variety of revolutionary groups, the history of the Revolution






3 See, e.g., Gilly 1983; Hart 1987; Knight 1986; Womack 1969. For summaries, see
Roderic Ai Camp 1993, Chapter 2: "Political-Historical Roots: The Impact of Time and
Place." For a more detailed examination, see Brandenburg 1964, Chapter 3, "Fifty Years
of Revolution (1)."
4 See, e.g., Brenner 1971[1943], Tannenbaum 1966 [1933].
5 Purnell (1999) makes this point. Examples of revisionist scholarship are works by Ruiz
(1980) and Womack (1991).








and the formation of post-revolutionary regimes provide insights into the shape of the

modem governing regime and the forces that sway it.

Francisco I. Madero called the nation to armed rebellion against Diaz, founded the

Anti-Reelectionist Party and advocated electoral reforms and public education (Camp

1993:38). He was responsible for the revolutionary 1910 Plan of San Luis Potosi 6 and

ousted Diaz in 1911. Madero ruled until his assassination 1913, when a coup d'etat by

Victoriano Huerta removed him with the support ofporfiristas. President Huerta's

authoritarian tactics were not readily tolerated, however, and shortly after gaining power,

Revolutionary forces again gained momentum in different areas of the country. These

groups were led by Venustiano Carranza, Alvaro Obreg6n, Plutarco Elias Calles,

Francisco "Pancho" Villa, Emiliano Zapata and Pascual Orozco. The four years that

followed were the most violent years of the Revolution.

Class-based needs and geographical variability characterized the demands of

different Revolutionary groups. For example, the Zapatistas in the south placed greatest

emphasis on the demand for land. The followers of Villa in the north sought regular

employment. But neither Zapata nor Villa could unite the country; instead such leadership

was gained in 1914/15 by Carranza and Obreg6n (Brandenburg 1964: 53). The Carranza-

Obregon combination promised a real social and political transformation (Brandenburg

1964:53).






6 The 1910 Plan of San Luis Potosi "advocated three important political items: no
reelection; electoral reform (effective suffrage); and revision of the Constitution of 1857
(Camp 1993:38).








Popular consensus was limited and political succession during the next decade was

marked by strife, exile and assassinations as a result of class and regional disputes.

Nonetheless, several generalizations may be made about the impact of the Revolution on

national political opinions. One important informal institution that grew out of the

Revolution is a theme of "Mexicanism" or "Mexicanization" (see, respectively,

Brandenburg 1964:68 and Camp 1993:39). Roderic Ai Camp explains that

Mexicanization is a broad form of nationalism, encompassing economic nationalism, pride

in Mexican national and cultural heritage, as well as attention to indigenous heritage

(Camp 1993:39-40). Mexicanism was also termed "revolutionary nationalism"

(Middlebrook 1995:302). Revolutionary ideology was evident in Revolution-oriented

educational institutions, the art of the famous muralists Rivera, Siqueieros and Orozco,

and in music, architecture and literature (Brandenburg 1964:68).

Revolutionary ideals took shape in the early 20t' century. Some ideals gained

official status, with their heritage readily observed in formal Mexican institutions

throughout the post-Revolutionary period. Others remained more elusive, and are

described by one scholar as revolutionary myths (Erfani 1995). For example, Erfani

argues that the idea of a strong state was merely a myth created by a misinterpretation of

state sovereignty as state power, when in fact "the executive branch of government in

Mexico was culturally and legally obligated, but not actually equipped, to control the

economy in order to protect popular groups' socioeconomic interests" (Erfani 1995:58).

Belief in the power of the state was thus an informally institutionalized ideal. The list of

formally and informally institutionalized ideals includes such general concepts as social

justice, the acceptance of a strong state, the breakup of large landholdings, acceptance of








labor organization and support for social security as well as the Constitution (Camp

1993:40-42). Throughout the 20"' century various Revolutionary ideals remained informal

institutions without formal manifestations, while other ideals became formally

institutionalized without having the effects anticipated and fought for during the

Revolution. As will be demonstrated in the two chapters that follow, the

institutionalization of these Revolutionary ideals is a heritage that remains influential even

at the turn of the 21st century.

Many Revolutionary ideals were formally institutionalized in the Mexican

Constitution of 1917. For example, the ideal of social justice took the form of

constitutional articles dedicated to support public education, the breakup of large

landholdings and labor rights. Article 3 required free, secular and obligatory public

education to be available to all Mexicans, and Article 27 aimed to address the problems of

landless peasants (Erfani 1995:27). Encompassed under Article 27 was legal support for

the ejido, a form of communally held land. Ejidal lands had begun to be distributed as

early as 1915 to groups of land claimants (Randall 1996:328). Constitutional agrarian-

reform measures provided for a host of land issues, including:

...restitution of lands to peasants illegally dispossessed, for rotation of lands
to those without them but who required land in order to subsist, for
recognition of existing small private farms and encouragement of the
creation of more, for the creation of new agricultural centers in order to
bring about widespread distribution of the rural population, for the
limitation of the size of rural property holdings to avoid land concentration,
and, in general, for the forced breakup of the hacienda system. The
Constitution thus made unequivocably clear that the semicollective ejido
and small private farm were to exist side by side. ... [T]he dreaded hacienda
system was doomed for what it had done to the Mexican soul and soil-for
its power concentration and marginal productivity. (Brandenburg 1964:55-
56)








The connection between Revolutionary goals and Article 27 of the Constitution is

frequently articulated. Article 27 was "the institutional response to the demands of 'Tierra

y Libertad' (Land and Liberty) shouted on the battlefields by peasant insurgents during the

Mexican Revolution" (DeWalt and Rees 1994:1). The ejido thus embodied the ideals of

the Revolution in a way that touched the lives of many of the poorest citizens of Mexico.

The impact of the institution of the ejido on agrarian life and rural development

throughout the post-Revolutionary period will be examined in detail in Chapter 6.

The third aspect of social justice described above, labor rights, was also formally

institutionalized in Section 6 of Article 123 (Brachet-Marquez 1994:56). However,

Article 123 merely gave legal status to the conquests achieved through the struggles that

had taken place over the years among workers, the state, and capitalists (Brachet-Marquez

1994: 57). In fact, the Constitution laid foundations that eventually restricted the ability of

labor to achieve further advances (Brachet-Marquez 1994:57).

In sum, the Revolutionary ideals of Mexicanism and social justice had both

informal and formal institutional manifestations, as introduced briefly above. The impact

of these formal and informal Revolutionary institutions on the implementation of neoliberal

reforms in Mexico is discussed in chapters 5 and 6. Also important to the analysis in the

next two chapters is an understanding of the relationship between the Partido

Revolucionario Institucional (Party of the Institutionalized Revolution or PRI) and the

state, an understanding of the linkages between historical Mexican corporatism,7



7 Corporatism is a form of sociopolitical organization. Nikki Craske explains that, "The
principle characteristic of corporatism is the vertical, hierarchical and 'functionally
differentiated organisations' which separates potential allies" (Craske 1996:80).








clientelism and corruption, and information about the sexenio (the six-year term for

presidential office). This essential background is summarized below.

The Relationship Between the PRI and the State


Throughout much of the 20th century, the Mexican political system has been

characterized by PRI-state fusion and statism.8 The dominance of the "official party" in

Mexican politics dates back to 1929, although it has been renamed twice since its

inception. President Plutarco Elias Calles created the Partido Nacional Revolucionario

(the National Revolutionary Party or PNR) in 1929. In March 1938, populist President

LUzaro Cbrdenas renamed it the Partido de la Revoluci6n Mexicana (Mexican

Revolutionary Party or PRM). President Cdrdenas did more than any other post-

Revolutionary president to fulfill many Revolutionary demands, especially through

agrarian reform.

With the changes instituted by Cirdenas, corporatist organization was solidified

under the ruling party:

The old geographical and individual membership structure of the PNR gave
way to an organization of four sectors-labor, agrarian, military, and
popular. The first sector was turned over to trade unionists, the second to
the ejidatarios, the third to the soldiers, and the fourth to civil servants and
miscellaneous elements. These four sectors collectively decided which
among them should be allotted specific public offices to fill, then turned
over the actual nominating process to the designated sector. Once this
sector announced its nomination, all four sectors were pledged to support
the candidate at the polls (Brandenburg 1964:91).

Other than the military sector, which was dissolved in 1940, the corporatist organization

that was formalized under Cdrdenas has a long heritage. In 1946 Miguel Alemin


8 In statism, the state plays a dominant role in the political economy of a country.








redesigned the party, and its name was changed to the Partido Revolucionario

Institucional (PRI). The party's theme was changed from the PRM's "For a Democracy

of Workers" to the PRI's "Democracy and Social Justice" (Brandenburg 1964:101). The

institutionalization of the PRI and its relationships with the three key sectors (labor,

campesinos and the "popular sector" of civil servants and others) has had an extremely

influential effect on Mexican political life for more than five decades, as will be discussed

further in the section on corporatism.

PRI-state fusion makes pinpointing the locus of power difficult. For example,

scholars such as Camp (1993) suggest that the state, rather than the party, is the more

powerful of the two.9 Yet other analysts argue that the party holds the power. Topik

(1993) for example, remarks that the PRI's power has long been considered exceptional

when compared with other parties internationally. He comments that in 1992/93:

... the PRI still seems to be the most secure political party in Latin
America. Indeed... the PRI is the longest standing hegemonic party in the
world. This comes as a puzzle after reading these articles which all dwell
on the party's lack of 'modernity,' lack of 'institutionalization,' 'declining
legitimacy,' and 'authoritarianism.' Clearly, Mexico's political leaders have
been doing something right. It would be worthwhile studying them. We
need to know... why these political regimes persisted so long in the face of
so many apparent obstacles. (Topik 1993:287)




9 Camp argues:

... [T]he Party leadership is selected by the president, thus placing the Party
under the thumb of the executive branch. The Party relies on the executive
branch for financial support; generally, the Secretariat of Government
allocates the funds. The support is difficult to measure because it involves
more than money. The government, through its contacts, provides many
other resources, such as lodging, transportation, and meals for those doing
Party business. (Camp 1993:142)








Since the PRI's hegemony has declined in recent years, few scholars would still describe

its role as powerfully as suggested by Topik. Nonetheless, this description provides

insight into the historical significance of the PRI over many decades. The fall of the PRI

has been forecasted by various observers over the course of many decades, yet through

the use of corporatist and clientelist 10 ties (as well as varying degrees of electoral fraud),

it has managed to hold on to power.

The traditional success of the PRI is due in large part to its network of corporatist

and clientelist resources (Klesner 1996). The formal and informal institutionalization of

these relations created vertical linkages between many different layers and classes of

society. Rural-urban links were formed as well as personal ties that were handed down

over several generations. PRI / state linkages unified control over the national

development "project," and restrained the private sector by monopolizing subsidies,

issuing public contracts and licenses and controlling labor unions (Fernandez Jilberto and

Hogenboom 1996:148; Grindle 1996:49).

During the period of Import Substitution Industrialization (ISI) the state protected

Mexican businesses from foreign competition. ISI began in Mexico in the 1930s and did

not end until the mid- to late-1980s (Lustig 1998). The PRI / state's control over labor

facilitated capital accumulation and increased business investment (Handelman 1997:118).

Although links between different business groups and the state vary in strength, historical

ties to business have been fortified since the administration of former President Salinas de



10 Patron-clientelism, often called simply "clientelism" is a system of"clientelist"
interactions between elites (patrons) who disperse benefits to certain individuals (clients)
in exchange for political support.




Full Text
52
countries (Argentina, Brazil, Chile and Mexico), to encourage the production of
intermediate and capital goods (Dietz 1995a: 10). Many formal state institutions became
more heavily involved in the economy at this time. Formal and informal state institutions
created during the period were thus imprinted with characteristics suited to the ISI model.
For example, corporatist and clientelist institutions rewarded particular groups and
individuals that were instrumental in promoting industrialization. Some of these
institutions were more adaptable to the changing needs of states over the decades, while
others stagnated in their original functions.
As vertical ISI policies continued during the 1950s and 1960s, ECLA and the
World Bank encouraged development planning, and the Alliance for Progress^ urged
agrarian and tax reforms (Gerchunoff and Torre 1992: 259). The states ability to
intervene in national development to the extent that it did during the era of import
substitution attests to the enormous capacities of the state in Latin America at the time. In
order to direct the economy, the Latin American state:
invested heavily in the kind of infrastructure required by industry, such as
new roads, water and electricity supplies;
kept labour costs down in urban areas by subsidizing basic foods and
imposing price controls
protected local industries against foreign competition by imposing import
taxes and non-tariff barriers such as import quotas;
6 The Alliance for Progress was a U.S. assistance program for Latin America implemented
by the Organization of American States which ran from 1961 to 1973. Goals included the
reduction of poverty, increased social equity, economic and social planning as well as anti
communism. Commitment to the Alliance was lacking both in the U.S. and in Latin
America.


2
This chapter will first introduce the context of neoliberal reforms, a topic that will
be further explored in Chapter 3. Since the objective of this study is to show how
institutions affect the implementation of neoliberal reforms, the discussion will first frame
the context of the reforms. Next, the term institution is operationalized and institutions
are distinguished from organizations. The focus is on state and state-affiliated institutions,
both formal and informal, as discussed below. Institutions are defined rather broadly.
In the last section of this chapter, the theoretical and methodological approach
used to decipher the role of institutions during the implementation of neoliberal reforms is
introduced. A brief description of the contents of each chapter is also provided. As
discussed below, Chapter 2 draws out how a historical institutionalist perspective provides
the best explanatory power for this study. The general review of the progress of
neoliberal reforms in Latin America in Chapter 3 is followed by a case study of the impact
of institutions on the implementation of neoliberal reforms in Mexico. A variety of
institutions are discussed, with special focus on how state agrarian and labor institutions
hinder the implementation of neoliberal reforms. The final chapter delves into the
implications of the argument made in this study for development policy making in Mexico
and other states.
The Spread of Neoliberalism
A general desire to understand why the development policies being applied in Latin
America succeed or fail was the impetus for this project. Neoliberal reforms were widely
accepted as the best solutions to debt and other economic problems during the 1980s and
most of the 1990s, but despite the passing years many indicators of development did not


121
electorate on that basis. By articulating social liberalism, Salinas was able to defend the
necessity of neoliberal reforms while associating himself with many of the ideals of the
Revolution in the process:
... [Salinas] highlighted the liberal, constitutional elements of
postrevolutionary beliefs, reaffirming the states responsibility for
promoting social justice while criticizing the state-led, protectionist model
of economic development traditionally associated with revolutionary
nationalism. By referring to his program as the reform of the revolution,
Salinas sought to ground his ideas firmly in that earlier tradition. One
might even argue that Salinass strong emphasis on social justice themes
reaffirmed the continuing vitality of the most important political ideas
embodied in the Mexican revolution, ideas whose survival into the 1990s
depended in large part on the continued presence of mass organizations
such as the CTM which were committed to defending them (Middlebrook
1995:303-304).3
The name social liberalism epitomizes the continued informal commitment (or
pact) between the regime and its constituents. The social aspect of Mexican
neoliberalism may in fact be quite weak, but at least on some level, the policy sounds more
attentive to social needs. This remains important in a country such as Mexico, whose
political stability is based on continued social tolerance of development policies that carry
significant burdens for large segments of the population. These aspects are important to
consider when a development policy is conceived. Revolutionary norms have acted as a
filter to the implementation of neoliberalism:
The cultural poverty of neoliberalism has led to the appearance of...
hybrids... [of] free markets with traditional social values...
In Mexico, this hybrid has been dubbed social liberalism. Social
liberalism seeks to reclaim the tradition of nineteenth-century Mexican
liberalism and the political values associated with the Mexican Revolution.
3 The CTM is the Confederacin de Trabajadores Mexicanos (Confederation of Mexican
Workers).


68
of institutional continuities. Indeed, they discuss institutions only in the context of
institutional change, in reference to the contributions of Douglass North (1990). 16
They argue that the arrival of capitalism in Latin America is a time of fundamental
changes to the institutional milieu. Yet while they dismiss the old order as irrelevant, they
cannot deny the possibility that it might once again prove influential. Roberts and Araujo
warn:
If Latin American reforms do not maintain their momentum, then the
natural inclination is for the old order to re-infect the system with rent-
seeking forms of behavior, permitting privilege to supplant the market as
the allocator of resources. (Roberts and Araujo 1997:7)
It is reasonable to note that if the old order can return, it must still exist. Rather than
dismissing it, it is better to discuss the ways that institutionalized interactions may remain
influential, perhaps through informal means.
Other scholars use language that is less slanted, yet similarly overlook continuities
through their focus on change. As an example, Sautter explains that,
... economic policies presently pursued in Peru and other Latin American
countries can only be observed with amazement. Old populist recipes are
being rejected. A very orthodox policy of budget discipline is pursued, and
the liberalization of markets is demanded today just as vehemently as it was
rejected before. A dramatic 180 turnaround in the economic order is
taking place. (Sautter 1993:10)
Likewise, Green aims to show the all-encompassing nature of the transformation under
way in Latin America (Green 1995:8). Although it is natural that scholars describe
changes as they occur, this has frequently been done at the expense of more balanced
evaluations of the development picture in Latin America.
16 Roberts and Araujo explain that, As North emphasizes, the path of institutional
change determines the level of economic opportunity in a society. This book is about


Abstract of Dissertation Presented to the Graduate School
of the University of Florida in Partial Fulfillment of the
Requirements for the Degree of Doctor of Philosophy
TFIE INFLUENCE OF STATE INSTITUTIONS ON THE IMPLEMENTATION OF
NEOLIBERAL REFORMS: EVIDENCE FROM THE MEXICAN CASE
By
Diane M. Just
December 1999
Chairman: Philip J. Williams
Major Department: Political Science
Since the early 1980s in Latin America, neoliberal policy makers have advanced
strategies of privatization, liberalization and structural adjustment as the solutions to
economic development problems of the region. Analysts describe a rapidly diminishing
role for the state, and point to examples of privatization and liberalization. Yet such
portrayals are overzealous: the actual implementation of neoliberal reforms has fallen short
of the outcomes originally envisioned. Having demonstrated the limits to the success of
neoliberal reforms in Latin America in general, this study moves to a case study of one
country, Mexico, in a quest for knowledge of the role of institutions during these reforms.
Using a historical institutionalist perspective, a spectrum of formal and informal
institutions of the state are found to impact these reforms. The institutions under study
include communally held lands (ejidos), the National Peasant Confederation (CNC), the
IX


112
even possible. At election time, this informal norm causes some citizens to simply void
their votes in protest.
Corporatist institutions are powerful in the Mexican political system. The
corporatist system is marked both by formal corporatist institutions such as the historically
incorporated CNC, the CTM and the FNOC, and by informal institutions, such as the
belief that in order to accomplish political goals, corporatist organization is best (or
inevitable). The heritage of corporatist forms of governance has led to a debate over the
existence of neocorporatism, which has a broader social base. This will be discussed
further in Chapter 5.
Related to the corporatist sociopolitical organization is the reliance on patron-
client ties between elites and citizens seeking to benefit directly from the system. This may
take forms that range from fairly appropriate relations to downright corrupt interactions.
These institutionalized interactions include both carrot and stick types of corruption.
Corruption is the focus of an anticorruption campaign at the beginning of each presidential
sexenio, but as the sexenio passes, public officials return to profiteering tactics,
culminating in the corruption-filled year of Hidalgo.
When thinking about the history and future of the Mexican corporatist system, it is
useful to adopt a historical institutionalist perspective such as that suggested by Stepan
(1978). This integrates the insights of structural and agent-centered approaches. Elites
shape development but they also take the institutional context as a given, and make
decisions accordingly. The following chapters will highlight the ways that state
institutions hinder and distort the effects of neoliberal reforms. Still, policy objectives
over time are dynamic, not frozen. As neoliberal policies are implemented, policy contexts


21
water... When carefully handled, the perspectives allow for synthesis in
ways which have not yet been recognized. (Resen 1998:136)
Indeed, through the use of institutional studies, the outlines of a cumulative discipline may
finally be under the process of construction in political science (Ostrom 1995:179).
Lower-level perspectives (which begin with the individual) may be distinguished from mid-
and higher-level perspectives, which examine institutions and structures:
Instead of separate tables, we need to imagine ourselves working at
separate levels, all viewing a complex mosaic of recursive processes
occurring on multiple time-space fields. Those of us working at the lowest
level need the help of those who can see broader outlines. Those of us
working at a higher level need the help of those who can see how
individuals actually interact with one another to produce the higher-level
phenomena. In such a scientific house, there is no single level that provides
the best answer to all questions. Rather, one has to understand how
different levels provide better answers to some questions than others.
(Ostrom 1995:179)
This study relies primarily on a mid-level institutional perspective, historical
institutionalism. The historical institutional perspective links examinations of how
institutions influence decision-making and standard operating procedures (lower-level
phenomena) with discussions of the macro-consequences of that impact (higher-level
phenomena). When appropriate, however, the discussion is bolstered using insights from
approaches used in other levels of analysis as well .^ Before expanding on approaches that
emphasize the power of institutions, an examination of approaches that begin with the
individual is made.
5 As one scholar suggests, In fact, combining levels of analysis is necessary, because the
empirical object under study is, in fact, multileveled (Rothstein 1996:23).


REFERENCES
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152
In a number of different ways, the LFT, a formal state institution, also hinders
neoliberal reforms. It causes legal insecurity and thus increases the reliance on sub
contractors. Promotions based on seniority and exclusion clauses for non-unionists serve
to limit neoliberal demands for efficiency, mobility and transparency in the labor sector.
Reforms to wage legislation have not created the intended productivity incentives because
of informally institutionalized means of setting wages. In addition, formal labor legislation
continues to present a cost-benefit gap between the cost to the employer and the benefit to
the worker. Although the influence of these informal and formal institutions is sometimes
weak, on other occasions it is decidedly more substantial. Formal and informal
institutional effects will be further examined in Chapter 6, with a focus on institutions
affecting the agrarian sector.


CHAPTER 1
INTRODUCTION: HOW DO INSTITUTIONS IMPACT NEOLIBERAL REFORMS?
As the 20th century draws to a close, scholars reflect on an era of contradictions.
Exponential growth in technology, education and communication is countered by growing
environmental concerns, problems of food distribution and an expanding number of
impoverished citizens and refugees. These contrasts make the selection of sound national
development policies a serious and complex task, as policy makers must weigh the
consequences of their choices from a number of different angles. The impacts of their
decisions are frequently profound, although not always in the ways the policy makers
hope. New policies frequently fall short of their objectives because the institutional
context is not fully considered.
This study examines the impact of institutional continuities on the implementation
of development policies. Specifically, the goal is to reveal how institutions affect
neoliberal reforms. The focus on Mexico was selected both because of my experience
there and because its state institutions have deep historical roots. This research suggests
that corporatist and clientelist institutions in particular are remarkably enduring even when
other institutions are dismantled. These and other state institutions significantly alter the
success of neoliberal reforms. The implications of this study extend beyond the Mexican
case to other regions where neoliberal policies are applied.


47
is provided as to how the beliefs of ejidatarios interact with the influence of ejidos during
the implementation of ejidal reforms. The tension between the neoliberal demand for
efficiency expressed explicitly at the national and international levels, and the reality of
political and institutional power at the subnational level will be exposed.


94
system. The following discussion will reveal how the three are embroiled, resulting in a
sociopolitical organization that is both formally and informally institutionalized. It will
highlight the differences between a generally sociological determinist approach used by
Howard Wiarda (1973, 1981) an agent-centered approach such as that used by Philippe
Schmitter (1974), and a historical institutionalist approach taken by Alfred Stepan (1978).
The perspective adopted here is similar to that of Stepan, yet Wiarda provides background
crucial to this (and any) discussion of Latin American corporatism. If one chooses an
institutional level of analysis, the contributions of both Stepan and Wiarda are especially
useful.
Wiarda defines corporate entities as groups of people bound together by similar
functions, interests, occupations, locations, etc. (Wiarda 1981:34-35). Modern Mexican
corporatism is a type of sociopolitical organization in which corporate entities are linked
vertically in the shape of a pyramid or inverted cone, with the central state apparatus at the
top (Wiarda 1981:34-35, 231). Corporatism throughout most of the 20th century in
Mexico has involved the incorporation of significant societal groups into the political
system headed by the PRI / state. But corporatist roots lie even deeper; there are two
different traditions of corporatism: the ...formal-institutional corporative systems of the
1920s and 1930s and the sociocultural tradition of corporatism which has a far longer
history... (Wiarda 1981:118). Both of these traditions are relevant to the present study of
Latin American development, but the formal-institutional corporative systems of the
1920s and 1930s denominates for Mexico specifically the corporatist system headed by
the ruling party / state.


237
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U S.-Mexican Studies, University of California.
Cornelius, Wayne A. and David Mhyre. 1998. Introduction, in Wayne A. Cornelius and
David Mhyre, eds, The Transformation of Rural Mexico: Reforming the Ejido
Sector. U S. Mexico Contemporary Perspectives Series, 12, San Diego / La Jolla:
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Laura Randall, ed., Reforming Mexicos Agrarian Reform. Armonk, NY: M E.
Sharpe.
Craske, Nikki. 1996. Dismantling or Retrenchment? Salinas and Corporatism, in Rob
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the Mexican State?. London: Macmillan Press and New York: St Martins Press.
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Agrarian Reform: Household and Community Responses. 1990-1994. San Diego:
Center for U S.-Mexican Studies, University of California.
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CA: Center for U S.-Mexican Studies, UCSD


251
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231
In sum, both formal and informal institutions of the state significantly hinder the
implementation of neoliberal reforms. Neoliberal policy makers have frequently
underestimated the significance of institutions. As a result, in practice, the potential
benefits neoliberal policies promise have been delayed, causing unacceptable development
outcomes and burdening the poor indefinitely. To remedy this situation, policy makers
should examine the institutional makeup of each country more carefully before designing a
development model generally rather than specifically. Greater heed to institutional
influences will help policy makers find ways to overcome them or work around them, and
thus help make the effects of development policies more closely match the outcomes
originally envisioned. In addition, policy makers who assess the progress of neoliberal
reforms should pay greater attention to the effects of state institutions and be prepared to
reorganize policies accordingly. Policy makers must take institutional effects into greater
account, not only when designing policies, but also when reviewing their implementation
in practice. Both steps are imperative, given the urgent development needs worldwide at
the turn of the 21st century.


140
Nonetheless, belonging to a CTM-affiliated union did provide benefits. The
system in place by 1940 remained relatively unchanged until the 1970s, corresponding to
the period of IS1. One positive aspect of the incorporation is the close relationship created
between the official party and the official unions, with a built-in flexibility that has allowed
it to endure into the 1990s (de la Cruz 1995:21). The relationship has institutionalized
communications between the two groups. Hence the current weaknesses of labor unions
should not be construed as indications of the rupture of the corporatist system Labor
union weakness relative to the state was an issue in earlier decades as well. The roles of
official labor unions and other state institutions impacting neoliberal reforms in the labor
sector during the 1980s and 1990s are discussed in the following section.
Institutional Continuity during Neoliberal Reforms to the Labor Sector
The state-labor alliance that developed over the course of the 20lh century is an
example of an informal state institution that impacts the implementation of neoliberal
reforms. Many scholars view the era of neoliberal reforms as a time when state-labor
relations changed completely, yet the changes in the state-labor alliance have not been as
severe as some scholars have suggested. Several format state institutions also serve to
perpetuate elements of previous state-labor relations, in contradiction to the aims of
neoliberal reforms in the labor sector.
Informally institutionalized state-labor alliance
Since the power of labor alternated between offensive and defensive positions
relative to the state, continuity in state-labor relations denotes some variation in labor


201
demonstrates that populism can adapt to the neoliberal era and that it is not
defined by fiscal profligacy; indeed, even when constrained by fiscal
austerity and market reforms, personalist leaders have discovered diverse
political and economic instruments to mobilize popular sector support
when intermediary institutions are in crisis. (Roberts 1995: 83; italics
added)
In Mexico, the informally institutionalized belief in a strong provider state was
maintained despite the undoing of many social programs. The PRI/state attempted to
replace many structural social programs with a much cheaper populist skeleton that only
spends money where and when it is politically necessary (Fernndez Jilberto and
Hogenboom 1996: 153). Yet the breakdown of institutionalized forms of political
representation was not as severe in the Mexican case as in the case of Peru under
Fujimori. PRONASOL was used to incorporate new groups, but corporatist norms
remained influential in a variety of ways (Fernndez Jilberto and Hogenboom 1996;
Otero 1996). The PRI/state used PRONASOL to recreate clientelistic links with new
groups that fell outside the reach of the traditionally incorporated groups:
The programme attempts to compensate for the increasingly exclusive
character of the PRI by recreating a clientelistic linkage with those groups
that are no longer represented through traditional corporatist structures,
such as peasants, workers and the unemployed poor. As it coopts
numerous popular initiatives and organizations...while competing with
more independent groups, PRONASOL diffuses the political struggle of
the popular movements. (Fernndez Jilberto and Hogenboom 1996: 153)
Through PRONASOL, the government worked to regain its popularity by
creating and recreating corporatist ties between fundamental groups in Mexican politics
and the state, continuing the informal institution of corporatism by reforging old ties in
new ways as well as with new groups. PRONASOL complimented party reform and
reflects a modernisation, rather than a dismantling, of corporatism (Craske 1996: 89).
Although the state had created a new formal umbrella organization for the distribution of


TABLE OF CONTENTS
page
ACKNOWLEDGMENTS iv
ABSTRACT ix
CHAPTERS
1 INTRODUCTION: HOW DO INSTITUTIONS IMPACT NEOLIBERAL
REFORMS? 1
The Spread of Neoliberalism 2
Definition of Institutions 8
Theoretical and Methodological Approach 11
2 IMPACTS OF INSTITUTIONAL FACTORS ON NEOLIBERAL
DEVELOPMENT POLICY: THEORETICAL SUPPORT 17
What is Meant by the Umbrella Term Institutional Approach? 17
Approaches to the Study of Institutions 19
Rational Choice 22
Sociological / Organizational Institutionalism 28
Historical Institutionalism 35
Policy Implementation Literature 41
Conclusion 45
3 STATE INSTITUTIONAL POWER DURING THE IMPLEMENTATION
OF NEOLIBERAL POLICIES IN LATIN AMERICA 48
Latin American Development Strategies and Institutional Heritage 50
The Spread of Neoliberalism 60
The Emphasis on Change in Literature about Neoliberal Reforms 65
Evidence of Continuity due to Institutions during Reforms 69
Conclusion 78
4 CASE BACKGROUND: THE HISTORY OF THE
INSTITUTIONALIZATION OF THE MEXICAN STATE 80
The Institutional Heritage of the Mexican Revolution 83
The Relationship Between the PRI and the State 88
vi


143
Thus despite the fact that labors power has weakened, the state-labor alliance remains
basically intact (Cornelius 1996; Vargas and Velasco 1999; Zapata 1996).
Breaking the state-labor alliance was considered by some Mexican groups a means
to advance neoliberalism, whereas others considered it a means to detain neoliberal
reforms (Collier 1992:8). The state-labor alliance has advanced the implementation of
neoliberal reforms in the short-term, but has served in fundamental ways also to undermine
other aspects of their long-term goals. State-affiliated unions can have a negative impact
on economic development under excessive state control (de la Cruz 1995). The long-term
picture is thus quite mixed.
As a result of the cooptation of the CTM, independent labor movements in search
of greater power and autonomy have historically vied for space in the Mexican political
system. The longest standing independent labor movement is known as the FAT (Frente
Autntico del Trabajo, or Authentic Labor Front). The most recent example of a
significant independent union is the formation of the UNT (Union Nacional de
Trabajadores or National Union of Workers). The UNT was founded on November 27,
1997, with the intention of providing an alternative to the CTM. As of November 1998,
the UNT had around 1.5 million workers and represented about 150 separate unions,
while the official unions claimed 10 million workers (Bierma 1998). Yet in its first year,
the UNT did not gain any significant new membership (National Union of Workers..
1998:4).
Whether the UNT is able to provide a strong independent labor movement in
Mexico remains to be seen, but it appears already to be threatened by cooptation. One
year after its creation, the UNT had seen few successes:


79
are appearing, as some scholars (and even the IMF) begin to discuss the need for a second
generation of reforms. For example, Burki and Edwards maintain that it is imperative that
the neoliberal reform process now be broadened to new spheres, including disassembling
the remains of the old populist structures... (Burki and Edwards 1996a:4).
To delve more deeply into the effects of institutions on Latin American countries,
an examination of the Mexican case will be provided. Chapter 4 consists of a historical
introduction, and Chapters 5 and 6 analyze of the role of institutions during neoliberal
reforms. This close-up of state institutional effects will highlight the myriad of ways in
which institutions hinder, moderate and distort the neoliberal project.


9
the goals of particular governing regimes. Likewise, its needs may change under the
pressure of internal or external forces. State institutions, on the other hand, are formal
or informal institutions of the state. A state has a variety of state institutions.
Since state institutions are created by and operated for the state, they should share
its mandate and carry out its plans. Here it will be demonstrated that large deviations
from the officially proclaimed state policy are often a result of factors inherent in the
institution itself. Focusing only on state institutions will help to isolate how these
institutional effects interfere with neoliberal policies.
State institutions may or may not be formal organizations. An organization may
be an institution, but not all institutions are organizations. An organization, more
precisely, is a manifest entity designed by people to serve a purpose. Many social
scientists have grappled with the distinction between institutions and organizations. Three
common categories of organizations and institutions may be distinguished: (a)
organizations that are not institutions, (b) institutions that are not organizations, and (c)
organizations that are institutions (or vice versa, institutions that are organizations)
(Uphoff 1986:8).
In the present research, only the second and third of these institutional-
organizational links are examined. Organizations that are not institutions, or put
somewhat differently, organizations not heavily influenced by historical institutional norms
are not discussed. For example, some new state organizations created by a new governing
regime to fulfill specific new policy goals do not have an institutional heritage and are thus
not the foci of this study.


16
institutions will simply disappear, therefore, policies that assume and require such a
possibility are doomed from the outset. As the 1999 United Nations Development
Program Human Development Report (1999:8) argues:
Economic policy-making should be guided by pragmatism rather than
ideologyand a recognition that what works in Chile does not necessarily
work in Argentina, what is right for Mauritius may not work for
Madagascar. Open markets require institutions to function, and policies to
ensure equitable distribution of benefits and opportunities. And with the
great diversity of institutions and traditions, countries around the world
need flexibility in adapting economic policies and timing their
implementation.
Institutional effects should be taken into greater account when formulating
development policy, whether free-market oriented or otherwise. As neoliberal policies are
implemented, they are sometimes adjusted to accommodate institutional variables into
development schemes, as the discussion of the ejido in Chapter 6 will reveal. These
adaptations can aid development by creating a better match between policies and their
environment. Yet this study will also reveal many ways that development is affected when
institutional effects are not adequately incorporated into policy making and policy
implementation. When this occurs, policy outcomes may differ vastly from those
originally envisioned by policy makers. This study concludes with a discussion of how the
effects of state institutions on neoliberal reforms impact development in general.


139
in the political incorporation of the popular sectors (Collier 1992:30) The ensuing
incorporation compartmentalized organized labor, the peasantry, the military, and the
middle sectors, tying them closely to the presidency, and did much to fortify political
stability (Markiewicz 1993: 79).
This incorporation had a mixed impact on the influence of labor. It left a legacy
that provided for labor representation and influence within the party, yet also left the
system of labor representation open to cooptation and control (Collier 1992:3 1). When
the power of labor was weak, it was forced to provide more support to the state than its
own interests required (Brachet-Marquez 1994:78-79). The capacity of the mass
organizations for autonomous action has often been questioned (e g.. Collier 1992;
Cornelius 1996; de la Cruz 1995). From the 1930s to the 1990s, Fidel Velazquez kept
workers from striking, required them to vote for the PRI, and brokered wage hikes and
other concessions from the PRI government (Bierma 1998:3). These concessions were
always limited
*8 As mentioned earlier, the military sector was abolished in the next presidential term
(Collier 1992:31).
*9 Collier elaborates on the top-down nature of Mexican political incorporation:
By 1940 a much larger proportion of the Mexican population was
nominally included in the national political system, mostly by their
membership in peasant and labor organizations created by Crdenas. No
real democratization of the system resulted from this vast expansion of
political participation, however...[W]orking-class groups[]...influence
over public policy and government priorities after Crdenas was minimal
and highly indirect. Policy recommendations, official actions, nominations
for elective and appointive positions at all levels still emanated from the
central government and official party headquarters in Mexico City, filtering
down the hierarchy to the rank and file for ratification and legitimation.
(Collier 1996: 18-19)


253
Samstad, James G and Ruth Berins Collier. 1995. Mexican Labor and Structural Reform
Under Salinas: New Unionism or Old Stalemate? in Riordan Roett, ed., The
Challenge of Institutional Reform in Mexico. Boulder and London: Lynne Rienner
Publishers.
Samuels, Warren J., ed. 1988. Institutional Economics. Schools of thought in economics
series; 5, vol. 1, Aldershot, Hants, England Edward Elgar; Brookfield, VT: Gower
Pub. Co.
Sarles, Margaret. 1994. Political and Economic Reform in Argentina and Brazil:
Contrasting Priorities, Contrasting Success, in Jorge A. Lawton, ed., Privatization
Amidst Poverty: Contemporary Challenges in Latin American Political Economy
Miami: North-South Center Press.
Sautter, Hermann. 1993. Reorienting the Economic Order of Latin America Toward a
New Relationship Between State and Economy, in Hermann Sautter, ed.,
Economic Reforms in Latin America. (Gottinger Studies in Development
Economics; 1) Frankfurt am Main: Vervuert Verlag.
Sautter, Hermann and Rolf Schinke, eds. 1996. Stabilization and Reforms in Latin
America. Where Do We Stand?. (Gottinger Studies in Development Economics; 3)
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226
between (1) accepting the continuity of an institution that protects certain individuals or
sectors in the short term, and (2) dismantling such an institution in favor of a long-term
benefit. Such policy decisions are influenced by a multitude of factors.
As neoliberal policies have been implemented, some policy makers do note
discrepancies between their original plans and development outcomes, and they respond to
these problems by altering their policies in the hope of achieving better results. One
example of such revisions by policy makers has been the decision by the Mexican
government in the late 1990s to reassert a role for the ejido in rural development, in
response to the tenacity of the ejido as an institution. Whereas at the onset of the
PROCEDE program in the early 1990s, neoliberal planners expected the ejido to be
rapidly privatized, the government now has breathed new life into ejidal organizations by
allowing them to serve new functions. By 1998, the Secretara de la Reforma Agraria
(1998:129-134) was devoting attention to how strengthening the internal life of agrarian
communities and ejidos aids development there. In this fashion, policy makers respond to
the institutional context by creating policies that take advantage of institutions rather than
attempting to dismantle them. The neoliberal goal of promoting economic development in
the countryside remains, but the way to achieve it now seems far better suited to the
realities of the Mexican campo.
Unfortunately, policy makers rarely respond quickly enough to many types of
institutional restraints described in this study, or they may misinterpret the variety of
functions a single institution may serve. For instance, state or state-affiliated institutions
might be used as frameworks for the dissemination of information about an essential
neoliberal program. As one example, in the early 1990s, representatives of the official


228
hinder neoliberal policies, although they occasionally advance the policies or have no
significant impact in either direction. These three possible outcomes (hindering, advancing
or not influencing) may each be viewed as neutral, positive or negative for development,
depending on whether one believes in the efficacy of a particular neoliberal reform or not.
This makes generalizing about the impact of the effects of institutions on development
more challenging.
Yet while generalization is difficult, much evidence from the Mexican case shows
state institutions limiting reforms in key areas, such as land privatization and labor market
liberalization. If, as in this study, institutions are shown to have real impacts in these
meaningful areas, development policies that do not recognize and/or cannot account for
these effects do not adequately address the development needs of the country. By
revealing these institutional effects, the efficacy and appropriateness of neoliberalism as
implemented in practice is challenged. This conclusion suggests that similar institutional
effects might also be extremely relevant to other Latin American cases witnessing slow
results from neoliberal policies. Although the institutions differ for each country, policy
makers knowledgeable about a states formally and informally institutionalized relations
with the polity should assess what has been overlooked in the implementation of neoliberal
reform policies.
A Concluding Discussion: What Does the Future Hold?
With knowledge of the role institutions have been playing, how might one expect
development in Latin America and other regions to be affected? Many scholars agree that
reform processes become more challenging with the passing of time, when the initial crisis


130
state is discussed. Informal and formal pacts are institutions that significantly distort the
implementation of neoliberal reforms.
The Pact of DominationAn Informal Pact
The concept of a pact of domination is useful to understanding Mexican state-
society relations. Although institutionalized, it is an unwritten (and thus informal) pact. A
pact of domination is the institutionally sanctioned and coercively backed set of rules
that specifies who gets what at any one time within the confines of a national territory
(italics original, Brachet-Marquez 1994:33). In this institutionalized relationship, top-
down control by the state is checked by societal power:
The pact-of-domination construct encapsulates two apparently
contradictory elements: the notion of pact implies negotiation, conflict
resolution, and institutionalization, while that of domination connotes
inequality, antagonism, and coercion. The juxtaposition of these two terms
is meant to express the idea that though people accept subordination and
exploitation, they do not do so unconditionally. The notion ofpacted
domination indicates simultaneously the power wielded by the state over
dominated classes and the institutional or extrainstitutional means the latter
have at their disposal to modify the terms of their subordination. (Brachet-
Marquez 1994:32-33)
The concept of a pact of domination provides a means of understanding not only
institutional continuities (which are expected), but also institutional change (which is more
elusive). In times of class conflict and political crisis (during which there is a partial
rupture of both formal and informal institutional mechanisms), the reformist state responds
with concessions to incorporated societal groups (Brachet-Marquez 1994:7). These
episodes of class conflict punctuated by social reforms have created an institutionalized
pact between the state and society (Brachet-Marquez 1994:7). This institutionalized pact
may be traced from 1910 through 1990, through several different development periods.


243
Harvey, Neil. 1996a. Rural Reforms and the Zapatista Rebellion: Chiapas, 1988-1995,
in Gerardo Otero, ed., Neo-Liberalism Revisited: Economic Restructuring and
Mexicos Political Future. Boulder: Westview Press.
. 1996b. Impact of Reforms to Article 27 on Chiapas: Peasant Resistance in
the Neoliberal Public Sphere, in Laura Randall, ed., Reforming Mexicos Agrarian
Reform. Armonk, NY: M E. Sharpe.
1998. Rural Reforms and the Question of Autonomy in Chiapas, in Wayne
A. Cornelius and David Mhyre, eds., The Transformation of Rural Mexico:
Reforming the Ejido Sector. U S. Mexico Contemporary Perspectives Series, 12,
San Diego / La Jolla: Center for U S.-- Mexican Studies, University of California
Hattam, Victoria C. 1993. Labor Visions and State Power: The Origins of Business
Unionism in the United States. Princeton: Princeton University Press.
Hauptmann, Emily. 1996. Putting Choice BeforeDemocracv: A Critique of Rational
Chocie Theory. (SUNY series in political theory) Albany, NY: State University of
New York Press.
Heath, Jonathan. 1998. Original Goals and Current Outcomes of Economic Reform in
Mexico, in Riordan Roett, ed., Mexicos Private Sector: Recent History, Future
Challenges. Boulder: Lynne Rienner.
Heilman, Judith A. 1978. Mexico in Crisis. New York: Holmes and Meier
Heredia, Blanca. 1992. Mexican Business and the State: The Political Economy of a
Muddled Transition, Kellogg Institute Working Paper #182, October
Hritier, Adrienne. 1998. Institutions, Interests, and Political Choice, in Roland Czada,
Adrienne Hritier and Hans Keman, eds., Institutions and Political Choice: On the
Limits of Rationality. Amsterdam: VU University Press.
Hirschman, AJbert O. 1958 The Strategy of Economic Development. New Haven: Yale
University Press.
Ibarra, Elosa. 1998. Corte Suprema Suspende Devolucin de Propiedades que Fueron
Confiscadas," La Tribuna. April 23rd.
Ibarra Mendvil, Jorge Luis. 1996. Recent Changes in the Mexican Constitution and
Their Impact on the Agrarian Reform, in Laura Randall, ed., Reforming Mexicos
Agrarian Reform. Armonk, NY: M E. Sharpe.


172
Figure One: Total Number of Agrarian Groups and Certified
Agrarian Groups, December 1993 December 1999
Thus an examination of the progress of neoliberal policies in the countryside must take
into consideration the PROCEDE strategy of processing the easiest ejidos first. It stands
to reason that the ejidos that remain to be titled will probably take longer to process than
the ones processed thus far. So how does the current trajectory of completion compare to
the original policy plans? As stated above, the original expectation was that the process
would be complete by the end of 1994, but the date for the completion of PROCEDE has
been revised as delays occurred.


In Search of a Hierarchy of Significant Institutional Attributes 217
Significance of Institutional Effects to Development in General 221
A Concluding Discussion: What Does the Future Hold? 228
REFERENCES 232
BIOGRAPHICAL SKETCH 260


162
The differences between these two cases suggest that institutions created during
the agrarian reform years (such as the asentamientos and CAS lands) can affect the pace of
privatizations during neoliberal reforms. When extreme measures are taken to undo the
reforms and/or the institutions of the reform had only a brief history (as in Chile), the
institutional structures are essentially meaningless. Yet if the cooperatives are merely, for
example, abandoned by the state (as in Nicaragua), they will continue to affect the course
of land use and development. The Mexican case presented below reveals the impact of
agrarian reform institutions during the implementation of neoliberal counter-reforms and
discusses the potential long-term consequences. Like Nicaragua, the Mexican counter
reforms are being implemented in a political context of liberalization, suggesting that
institutional factors may retain significance.
The Ejido and Ejidal Reforms
Historical Role of the Ejido
A formal institution of the Mexican state with unmatched significance during the
implementation of neoliberal reforms in the agrarian sector is the ejido, introduced briefly
in the fourth chapter. Ejidos were created to provide agrarian reform beneficiaries with
usufruct rights to land. Modern ejidos vary greatly in territorial size, composition of
membership, wealth, production and history. Ejidos are:
groups of twenty or more farmers (ejidatarios) who organized to petition
for, receive, and work land redistributed during the agrarian reform. In
most ejidos, arable land plots were allocated to farmers who cultivate them
individually. Pasture, forest, and other lands not apt for cultivation are
common lands of the ejido. Few ejidos work arable land communally.
(DeWalt and Rees 1994:1, fn.l)


41
Policy Implementation Literature
This review of a broad spectrum of institutional perspectives has revealed some
similarities and differences in institutional approaches in a number of fields and across
time. Obviously, no such brief review could hope to really do justice to the vast literatures
that expound on the ideas of the leading figures in various theoretical areas. The goal,
rather, was to show the utility of institutional approaches, and to relate the perspective on
institutions used here to the work of others. Yet there is an important literature that has
thus far been excluded from the discussion, namely, the study of policy implementation.
Policy implementation is one of many approaches within the field of public
administration. The study of public administration was distinguished from the study of
politics by Woodrow Wilson in The Study of Administration (1887), and this dichotomy
has influenced research on adminstration and politics through the present time (Kettl
1993:407). Scholars regret that the divide between the two fields leaves each one
incomplete, and maintain that we should attempt to link them to overcome this problem
(see, e.g., Katznelson 1998:196; Kettl 1993:408).
The present research examines the impact of institutions on the implementation of
neoliberal reforms. Literature on policy implementation addresses the problems that arise
when instituting policies. Since the implementation of neoliberal reforms seemed to be
heavily influenced by political, institutional and bureaucratic factors, the institutionalist
approach will be supplemented with insights from the study of policy implementation. The
reason for doing so is to try to overcome some of the shortcomings that result when the
study of administration is divorced from the study of politics.


7
Asian tigers (South Korea, Taiwan, Singapore and Hong Kong) had been lauded as proof
of the efficacy of neoliberal ideals since the 1980s7 Evaluations of the extent to which
the East Asian economies actually followed the recommendations of the Washington
Consensus did reveal significant shortcomings (Rodrik 1996) 7 Yet the example of their
relative success prior to 1997 helped encourage many countries (especially many Latin
American countries) to follow and even surpass the East Asian countries in adherence to
the tenets of the Washington Consensus (Rodrik 1996:17-18). A prime example is
Mexico, frequently cited as one of the strictest adherents to neoliberal recommendations
(Rodrik 1996:18). The trade and financial liberalization and privatization of countries
such as Bolivia, Argentina and Mexico surpassed those of the East Asian countries
(Rodrik 1996:18). The relative success of Latin American countries in implementing
neoliberal reforms is discussed further in Chapter 3. Chapters 5 and 6 will contest the true
depth of Mexicos adherence to neoliberal tenets.
Following the problems brought on by the Asian economic crisis, the neoliberal
model is being replaced by what scholars at the World Bank now call a two-pronged
development strategy that involves an effort to:
... put in place growth-enhancing, market-oriented policies (stable macro-
economic environment, effective law and order, trade liberalization, and so
on) and ensure the provision of important public services that cannot be
well and equitably supplied by private markets (infrastructure services and
education, for instance). (World Bank 1998:11)
6 For a discussion, see Rodrik 1996:12-13.
7 Rodrik judges how closely South Korea and Taiwan followed the prescriptions of the
Washington Consensus, and awards South Korea a score of about five (out of ten) and
Taiwan a score of about six (Rodrik 1996:18).


97
the structural features of corporatist forms should not be entirely dismissed (Stepan
1978:55).
When existing corporatist arrangements fail to fully incorporate all major sectors,
neo-corporatist forms emerge (Stepan 1978). For this reason, explanations based solely
on cultural continuity lose instructive power:
Explanations based on continuity are relatively weak where the
phenomenon to be explained is not so much continuity but the emergence
of stronger and novel forms of corporatism after a period of relative
abeyance. The simple fact is that neo-corporatist institutions are more
prominent in the Latin America of the 1970s than they were in the 1950s...
(Stepan 1978:54)
From a historical institutionalist perspective, both Wiarda and Stepan make
important points. A heritage of corporatism is part of the context in which state elites find
themselves. At times these elites have more potential for autonomous power such as, for
example, the late 1910s through 1930s in Mexico. The significance of elite roles varies
historically, and although the behavior of individuals is sometimes most significant, the
changes they elicit occur within a broader context of institutional continuities.
This is a good way of looking at the relationship between elites and cultural/
institutional context. The reason elites were able to solidify corporatist relations in the
post-Revolutionary decades is because of the prior history of corporatist relations. One
can combine the theoretical insights of both Wiarda and Stepan to achieve a historical
institutionalist perspective that leaves space for the role of individuals, yet can explain
continuities even if formal institutional ties are weak. Thus evidence of the rise of
neocorporatist links does not detract from a discussion of the continuities of corporatist
institutions. Instead, it reveals how the informally institutionalized heritage of relying on


165
suggested by the Constitution or envisioned by the reformist President Lazaro Crdenas
(1934-40). Much ejidal land was of a very poor quality to begin with, and as years passed,
the size of plots tended by individual ejidatarios shrank due to the division of plots among
successive generations of children. The pace of land distribution under the agrarian
reform always lagged behind applications for ejidal lands, and applications for lands are
still pending today. Ejidal production was fraught with difficulties, due in large part to the
lack of credit available to ejidatarios. Ejidatarios had difficulties in obtaining agricultural
credit for production:
.. since they had no title, they could not borrow from commercial
establishments, a defect only partially corrected by the founding of the
undercapitalized Banco Nacional de Crdito Rural (now called
BANRURAL), meant to loan primarily to ejidatarios... Only about 40
percent of ejidatarios received any credit at all (and many of those received
too little to be very useful)... (Thiesenhusen 1996:42)
This lack of credit provoked ejidatarios to seek other means of profiting from their
lands. Illegal measures became commonplace, as ejidatarios rented or sold their lands to
others and sought employment as wage laborers. Other ejidatarios or individuals owning
the remnants of haciendas bought the lands illegally and used them for larger-scale
production (Thiesenhusen 1996:42).
By the 1980s, ejidal agriculture was not competitive on a global scale. Many
neoliberal critics called for a change in the agrarian situation. By the early 1990s,
international forces became influential in prompting the Mexican government to reform its
land tenure. NAFTA negotiations began and liberalizing and privatizing land tenure
became a priority during debates over the Mexican economy.


229
has passed and the reform threatens deeply rooted interests and requires more thorough
institutional change (Morrow 1998:4). If this is true, and (as this study and others have
shown) institutions persist despite attempts to reform them, the potential for the success of
neoliberal reforms will only become less likely with the passage of time. Whereas
neoliberals expected certain lags between the implementation of reforms and the
realization of benefits, the delays have been far longer than anticipated. In general, the
responses of policy makers have thus far inadequately addressed this institutional impact.
Neoliberal reforms remain incomplete in Latin America, especially in countries
such as Brazil (e.g., Morrow 1998; Frediani 1996). Aside from institutions, the
sequencing of political and economic reforms also influences the reform process. Under
certain conditions, economic reforms have a greater chance of success (Moore 1997;
Przeworski 1991; Sheahan 1998; Valds-Ugalde 1996). For example, an authoritarian
regime has more independent power to enact reforms that are unpopular with a large
proportion of the population. Chile under the authoritarian rule of General Augusto
Pinochet is a case in which neoliberal reforms were swiftly implemented. Conversely, in
an environment of political liberalization, the populace gains new opportunities to reject
unpopular economic policies. Thus, another factor that may also hinder the
implementation of neoliberal reforms is renewed political mobilization, and the need for
politicians to alter development policies in order to garner citizen support. Fruitful
avenues for future research might examine the interactions between the types of
institutional effects highlighted here and the effects of new mobilizations by individuals
during political liberalization. The impact of these combined influences may result in
interesting changes in economic policies.


3
seem to be showing improvement. Observers have vastly opposing views about the cause
of this state of affairs. Some argue that the neoliberal policies were unrealistic or flawed
from the outset, by underestimating or accepting a high initial burden on the poor. Many
others argue that the reforms simply were not enacted properly or that insufficient time
has passed for benefits to accrue.
Neoliberal views became predominant early in the 1980s among such influential
agencies and actors as the International Monetary Fund (IMF), the World Bank, the
United States (U.S.) government, policy think tanks and many academics, and by the late
1980s, the viewpoint had acquired the label of the Washington Consensus. 1 Following
the onset of the debt crisis in 1981/82, the IMF demanded of recipient governments a
commitment to neoliberal tenets as a precondition for economic assistance. The adoption
of neoliberal reforms took place gradually and unevenly, but most Latin American
countries made the first steps to these reforms during the early to mid 1980s.2
These neoliberal policies represent a significant shift from development models
based on state-led growth popular in the decades before the debt crisis. Such models were
used in Latin America, Africa and in the Eastern Bloc (World Bank 1998:10; Rodrik
1996:12). By the early 1980s, heavy indebtedness and economic instability characterized
many countries in these areas. In Mexico, for example, four broad types of policy goals
existed: (1) foreign exchange had to be generated, (2) the role of the government in the
1 Heath makes this point and notes that John Williamson of the Institute for International
Economics in Washington, D C., coined the phrase (Heath 1998:62, fn. 5).
2 For more detailed reviews of the progress of neoliberal reforms in Latin America see
Williamson (1990), Sautter (1993) and Sautter and Schinke, eds. (1996).


CHAPTER 2
IMPACTS OF INSTITUTIONAL FACTORS ON NEOLIBERAL
DEVELOPMENT POLICY: THEORETICAL SUPPORT
To add to an understanding of the implementation of development policies this
study focuses on the role of institutions. An institutional perspective provides a useful
lens through which to view issues of development policy implementation, since the neglect
of institutional effects leaves scholars with only weak understandings of political and
economic interactions. This chapter will first roughly distinguish institutional paradigms
from other ways of knowing and then delve into a survey and comparison of several main
types of institutional approaches. In the end, a historical institutional approach is
determined to be the most useful, because of the insights it can provide into how
institutions influence decision-making, thereby impacting development. The chapter
concludes with a discussion of how this mid-level institutional approach will be
complemented with insights gained from macro- and micro-level perspectives.
What is Meant by the Umbrella Term Institutional Approach?
Institutional approaches are distinct from other ways of studying political, social
and economic phenomena, which may be divided into three general paradigms: (1)
institutional approaches, (2) behavioralist / utilitarian approaches, and (3) social
determinist / Marxist approaches (Immergut 1998:12). These approaches have varied in
popularity over time. Institutional approaches are mid-level approaches to the study of
17


185
ejidos. The legalization of joint ventures was supposed to involve the private real estate
sector in the low-income land market (Jones 1998). However, as of late 1996:
...only nine private sector-ejido partnerships have been approved (two are
for the same ejido), and a further two are at the project stage. Overall, the
nine approved developments total 3555 hectares, equivalent to less than
0.12% of ejido land on the periphery of Mexican cities. (Jones 1998:82)
Rather than a growth in the development of ejidal lands at the peri-urban fringe of
Mexican cities, little has changed (Jones 1998; Lpez Sierra and Moguel 1998). The
reluctance of realtors to become involved in these joint ventures is due to several
different factors, among them, an inability to negotiate with the ejido as [we] speak a
different language (Jones 1998:82). Thus the ejido as a distinct social, political and
economic institution prevents the successful negotiation of joint ventures because it lacks
a singular economic purpose.
In sum, in a myriad of ways, the institution of the ejido, a historical institution of
the Mexican state, serves to hinder the implementation of neoliberal reforms of the state,
namely, privatization and capitalization. Some ejidatarios reject PROCEDE outright,
preferring to retain the benefits they associate with ejido membership instead of
privatizing. In other ejidos, members cannot agree on whether or not to participate,
thereby delaying their incorporation into PROCEDE. Some ejidatarios apparently prefer
to complete only part of the titling process, in order to receive the benefits of titles,
without running the risks associated with private responsibilities. Finally, in the great
majority of ejidos that do complete PROCEDE, ejidatarios are not quickly selling their
lands as expected, and capital is not flowing into the countryside as was hoped.


93
neoliberal reforms, the states weak position relative to the private sector results in a
weaker overall position of the state. This weakening may then alter the balance of power
between the state and labor or the agrarian sector as well. In turn, this effect may cause
labor and agrarian sectors to reassert their demands, forcing political changes that grant
benefits to these traditional sectors. This circle of effects thus contributes to the
maintenance of the status quo.
The party and the state have distinct strengths and benefit from the ability to alter
and trade their roles over time (Fernndez Jilberto and Hogenboom 1996). At times the
PRI supports specific interests, while transferring responsibilities to the state:
The highly centralizing capacity of the state that is expressed by the
concentration of public power, has given sufficient capacity to both the
state bureaucracy and the PRI, together with the business elite, to define
the national economic policy. This has happened without counterweight
and in the absence of a pluralist political arena. . The role of the PRI has
none the less varied historically. Sometimes, the PRI forms the synthesis of
contradictory interests negotiated within the party that, at such moments,
takes the shape of a restricted political arena. At other times, the PRI
transfers the crucial role of the formulation of the national project to the
state and the political class of the state. (Fernndez Jilberto and
Hogenboom 1996:149)
An understanding of this relationship between the PRI and the state in Mexico is important
to the present study of the influence of institutions on neoliberal development policies.
Related to this PRI/state relationship is corporatist sociopolitical organization.
Mexican Corporatism, Clientelism and Corruption
The Mexican corporatist system has historically been marred by corruption and the
use of clientelistic ties. These features of Mexican corporatism make it impossible to
analyze the sociopolitical organization without reference to the effects they have on the


127
early advances were actually reversed, causing a return to traditional corporatist relations.
This has broader implications for the more general attempts to reform corporatist
institutions under neoliberalism.
This example supports the validity of a historical institutionalist perspective on the
role of institutions in development. Reform attempts were less significant than the existing
institutions, which dictated the ultimate outcome of this reform attempt. Neoliberal
reformers operate within institutional settings that may stymie their best efforts. Historical
institutionalism focuses attention on these institutions.
The continuities of corporatist ties are also highlighted through evidence of
corporatist pacts, the structuring of PRONASOL and other features of the Mexican
political system in the 1980s and 1990s (as discussed in the remainder of this chapter and
in Chapter 6). If corporatist and clientelist relations and state intervention are purportedly
becoming obsolete, one should not expect to find prominent examples of such links in
action. Yet the persistence of strong clientelist ties is evident even in Mexicos third
neoliberal presidency. After the economic crisis of 1995, a 71 billion dollar bailout of
Mexican banks took place. In March 1998, Mexican President Zedillo proposed the
transfer of debt that the bailout agency incurred to the state, an accounting shift that
To control the reform project, both regarding the party and.. broader
political and economic questions, the elite need to stay in power and the
PRI, whilst not as effective as it has been, still provides a substantial
contribution to the maintenance of power. Consequently, a complete
dismantling of the system was not carried out giving the old guard
important political leverage allowing them to counter attack. This ... has
lead to U-turn and retrenchment of corporatism. The final stage of the
Popular Sector reform returned it to the same basic structure as
1988,..[T]he membership was left virtually intact...and, more importantly,
the political practices remained largely the same. (Craske 1996: 85-86)


218
of influence and many diverse forms of support. For example, the CTM has an
institutionalized relationship with the state, and has control over and support from
unionized workers. Although the CTM has lost power during the implementation of
neoliberal reforms, it still enjoys a position of relative privilege in its relations with the
state. For example, when the National Minimum Wage Commission (CNSM) was
convened in 1999, the Secretary of Labor denied the independent National Union of
Workers (UNT) representation while the CTMs position was irrefutable. Reforms did
broaden the CNSM to include other unions, among them the long-standing Revolutionary
Confederation of Workers and Peasants (CROC) and the Revolutionary Confederation of
Mexican Workers (CROM) The example suggests, as intuition would predict, that a
longer heritage is one way of identifying a potentially influential institution.
Using this characteristic as an identifying feature, one could suggest many Mexican
state institutions that might be influential. Many long-standing institutions have been
discussed in this study: formal institutions such as the CTM, the CNC, the FNOC, the
Federal Labor Law or the ejido, as well as informal institutions such as the pact of
domination between labor and the state, and many corporatist and clientelist ties that have
endured between different groups or individuals and the state. Newer institutions more
closely match the neoliberal objectives of the state. Nonetheless, informal institutions
often influence the way newer institutions function in practice. For this reason, it is
common for newer institutions to have a more mixed impact on the implementation of
neoliberal reforms. Some examples of this are the PROCAMPO program of agricultural
subsidies and the PRONASOL anti-poverty program. Similarly, informal institutions may
cause other outcomes that undermine neoliberal goals more indirectly. Some examples of


8
Good policymaking, institution building, and the provision of public services have gained
significance alongside the development of capital markets (World Bank 1998:11).
This listpolicymaking, institution building and the provision of public services
suggests the powerful influence of state institutional variables, giving credibility to the
goal of highlighting the role of such institutions. This disquisition attempts to provide
answers to some questions about the success of neoliberalism by revealing the influence of
state institutions on the implementation of reforms. If the implementation of neoliberal
reforms is hindered and distorted by institutions, a definition of institutions is certainly in
order.
Definition of Institutions
In the social science literature institution is defined narrowly or broadly; here it is
used broadly, to refer to both formal and informal structures or processes, as discussed
below. This section will clarify the present use of institution by discussing what state
institutions are and distinguishing institutions from organizations. It will also
differentiate between formal and informal institutions.
As it is not possible or desirable to discuss every variable that influences economic
development, the present study will focus only on the role of state and state-affiliated
institutions (hereafter called simply state institutions) during the implementation of
neoliberal reforms. The state is the governing structure of a society, and includes
government agencies and bureaucratic positions, but is not merely the particular elected
regime of any given electoral period. Its size and power depend both upon historical
factors and societal influences. It has autonomous power and interests that may outweigh


90
Since the PRIs hegemony has declined in recent years, few scholars would still describe
its role as powerfully as suggested by Topik. Nonetheless, this description provides
insight into the historical significance of the PRI over many decades. The fall of the PR1
has been forecasted by various observers over the course of many decades, yet through
the use of corporatist and clientelist 10 ties (as well as varying degrees of electoral fraud),
it has managed to hold on to power.
The traditional success of the PRI is due in large part to its network of corporatist
and clientelist resources (Klesner 1996). The formal and informal institutionalization of
these relations created vertical linkages between many different layers and classes of
society. Rural-urban links were formed as well as personal ties that were handed down
over several generations. PRI / state linkages unified control over the national
development project, and restrained the private sector by monopolizing subsidies,
issuing public contracts and licenses and controlling labor unions (Fernndez Jilberto and
Hogenboom 1996:148; Grindle 1996:49).
During the period of Import Substitution Industrialization (ISI) the state protected
Mexican businesses from foreign competition. ISI began in Mexico in the 1930s and did
not end until the mid- to late-1980s (Lustig 1998). The PRI / states control over labor
facilitated capital accumulation and increased business investment (Handelman 1997:118).
Although links between different business groups and the state vary in strength, historical
ties to business have been fortified since the administration of former President Salinas de
Patron-clientelism, often called simply clientelism is a system of clientelist
interactions between elites (patrons) who disperse benefits to certain individuals (clients)
in exchange for political support.


193
cases of cane growers with smaller plots being denied access to IMSS on these grounds
(Otero 1998:95, fn. 8).
This example shows the influence of several more state / state-affiliated
institutions on the implementation of neoliberal reforms. The CNC and FNOC have
guaranteed the availability of loans to producers of sugarcane instead of allowing the
principle of comparative advantage to dictate production decisions. The IMSS is another
example of an institution supported in part by the state^ that in theory ought to be
promoting neoliberal reforms, but in practice is continuing to support the status quo.
Thus the reforms in this case continue to be hindered by governmental institutions such
as the CNC, the FNOC and to a lesser extent, the IMSS.
The Procuradura Agraria and Other Institutions
What other state institutions influence the implementation of neoliberal reforms in
the agrarian sector? An examination of the role of the Procuradura Agraria (PA)
provides a fascinating example of the interconnections between old and new institutions,
and the transfer of historically institutionalized responsibilities between them. It also
reveals the continuity of corporatist ties between ejidatarios and state agencies.
The states goal of privatizing the ejido led to interactions with the PA that in fact
strengthened corporatist ties, thereby undermining some of the intended reforms. The
PAs role now is to coordinate PROCEDE. The PA field staff in central Veracruz, under
pressure from the state to implement the reforms, have been using corporatist ties to try to
46 The percentage of support to the IMSS by the state was reduced from 25 percent to 5
percent in 1993. Nonetheless, the state retains some influence over the impact of the
IMSS.


14
sector. In addition, some data was obtained directly from Mexican agrarian institutions
through mail, email and telephone. For example, in the section on ejidos in Chapter 6,
data was obtained from the National Agrarian Registry (the Registro Agraria Nacional).
Mexicos communication systems have increased the opportunities to gain valuable insight
about local events even from a considerable distance.
Research relying upon secondary literature is a particularly valid methodology for
a study that attempts to answer the broad questions raised here. The issues lend
themselves very well to a qualitative research method, and one of the greatest challenges
to scholars conducting qualitative research is the attempt to remain objective. The use of
secondary data might even ensure a higher standard of objectivity than could be expected
if conclusions were based exclusively on qualitative evidence collected first-hand. Instead,
the observations of many scholars are collected and presented in a unified fashion.
A common thread among the observations of a variety of scholars on the interplay
of continuity and change, structure versus agency, institutions and the role of individuals is
demonstrated, yet what results is not merely a summary of the work of others. Instead,
the evidence collected here supports conclusions that frequently differ in important
respects. Simply put, while much of the literature emphasizes elements of change, this
study highlights continuities caused by institutional factors.
Chapters 5 and 6 provide evidence from Mexico about how and to what extent
state institutions affect the implementation of neoliberal reforms. The significance of a
number of both informal and formal institutions during the implementation of neoliberal
reforms in Mexico is documented. In Chapter 5, a reflection on the role of pacts as formal
embodiments of corporatism follows a discussion of corporatist institutions in general.


208
institutional history of the agrarian reform and the overt dismantling of the cooperatives
and atomizing of former members made land use depend almost exclusively on the
potential for export production. If extreme measures are taken to undo the reforms (as
during political authoritarianism) and /or the institutions of the reform have only a brief
history (as in Chile), the institutional structures are essentially meaningless. Yet if the
cooperatives are merely, for example, abandoned by the state (as in Nicaragua), they will
continue to affect the course of land use and development. This comparison suggests that
institutional factors have a greater impact on the implementation of neoliberal reforms
when they have a longer history of institutionalization and within non-authoritarian
contexts.
As in Nicaragua, Mexican state-instituted agrarian reform lands also serve to limit
the impact of neoliberal reforms, as evidenced in their slow conversion into privately held
lands. The Mexican reforms also occur during a period of political liberalization, and
many ejidos have a far longer history of institutionalization than either the Chilean
asentamientos or the Nicaraguan CAS lands. This suggests that ejidos may serve as even
greater limits on privatization than either of these other two Latin American counterparts.
Preliminary evidence suggests that this is indeed the case. Some ejidos have slowed or
stalled the completion of the PROCEDE privatization process, delaying its completion
indefinitely. The original date for completion of PROCEDE has been pushed from 1994
to 2000, and current data indicate that the actual completion may take years more.
Other institutions also hinder the influence of the reforms in the agrarian sector.
The CNC, the FNOC and the IMSS often perpetuate systems of assistance based on
criteria other than agricultural productivity or efficiency. The use of corporatist ties to


171
Table Four: Total Number of Ejidos (and Agrarian Communities) 15 Participating
in and Certified through PROCEDE, the Program for Certification of Ejido Land
Rights and the Titling of Urban House Plots, 1993-1999^
Year
Total
Number f
Interviewed
and Diagnosed
Percent of Total
Number Certified r
Percent
1993
27,343
3,809 a
14 a
1,268
4.6
1994
27,302
19,559 c
72 c, b
5,994
22.0
1995
27,218
@19,000 d or
19,559 c
70 d, b or 72 c, b
9,935
36.5
1996
27,218
22,377 a, dor
22,936 a, c
82 a, d, b or 84 a, c,
b
13,019
47.8
1997
27,218
27,144 b
100 b
15,892
58.4
1998
29,474
27,351
92.8 g 17
18,303
62.1
1999
29,701
N/A
N/A
20,000 18
67.3
Sources:
a Procuradura Agraria Procede, Cierre 1996 y Programa Operativo 1997, Avance
Acumulado 1993-1996.
b Sector Agrario
c (Data are for November, 1994) Jones and Ward, 1998: 254.
d Firma del Convenio de Desarrollo Social'
e Sector Agrario, December 31,1998, Actualizacin Annual del PROCEDE (web
page: www.sra.gob.mex).
f. Registro Agraria Nacional, Direccin General de Titulacin y Control Documental,
PROCEDE, personal communication, June 11, 1999.
g. Secretara de la Reforma Agraria 1998:106.
Data from 1993-1997 includes only ejidos, whereas data from 1998-1999 includes
ejidos and agrarian communities.
1 6 Since data come from different sources, discrepancies sometimes occur. Sources are
included so each reader can evaluate the data personally.
See also footnote 15 above.
I8 Data for 1999 are through December 6, 1999 (Comunicado No. 1895" 1999:1).


217
state roles are reincarnated within the core of new state institutions. The perpetuation of
these informal institutions serves to undermine the asserted goals of the neoliberal state at
the turn of the 21st century.
In Search of a Hierarchy of Significant Institutional Attributes
Many institutional effects have been discussed in this study, in the hope of
providing the reader with a sense of their scope and variety. They provide relevant
explanations for the slow fruition of neoliberal reforms described in Chapter 3. As
neoliberal reforms are implemented, policy contexts change. These changes in turn
influence revisions of the original reforms. Sometimes state institutions advance the
reforms, but more frequently they limit them. There is a growing consensus about the
need for institutional reforms in Latin America and other developing areas (e g., Burki and
Edwards 1997 and 1998). The evidence provided here suggests that institutional effects
are quite pervasive: informal institutions are reincarnated in formal institutions, formal
institutions that sometimes appear to lose significance can regain significant stature, and
institutions that are dismissed as irrelevant may prove to be doggedly persistent.
The examples of state institutions affecting the Mexican labor and agrarian sectors
reveal that in these key areas, institutions often hinder the impacts of neoliberal reforms.
But within these two broad groups, which institutions are most important? What features
do they share that other institutions lack? How has their role changed over time?
One characteristic of many influential institutions is their longevity. Although
long-standing institutions may lose their impact with the passage of time, a longer heritage
more often provides an institution with the opportunity to develop many different means


196
is significant, since in this context, corporatist and clientelist ties are used to influence
votes (Baitenmann 1998:120).48 The absence of ballot secrecy often helps maintain
corporatist ties and authoritarian control, as during the 1994 elections (Fox 1996).
Corporatist ties continue to flourish despite the governments neoliberal agenda of
bypassing old institutions in favor of more direct ties between the state and each
producer. The institutional design surrounding PROCEDE had many flaws, including a
severe conflict of interest by the PA itself:
While agrarian rights in general, and voting rights in particular, were not
respected during the implementation of PROCEDE, the government
agency set up to function as an agrarian ombudsman and deal with these
violations was ineffective. With the reforms to Article 27, the
Procuradura Agraria was revamped in order to play the role of an agrarian
ombudsman. Its internal rules and regulations state that its objective is to
defend the rights of ejido members and other rural producers by hearing,
investigating, and channeling to the appropriate authorities all alleged
violations of the agrarian legislation committed by public servants. The
contradiction lies in the fact that the Procuradura, first, is not fully
autonomous from the federal executive and, second, is the same agency
empowered de facto to coordinate and implement the titling program it is
supposed to arbitrate (Baitenmann 1998:120)
These contradictions set the stage for the continuation of corporatist controls by
the state over ejidatarios. The Secretara de la Reforma Agraria delineates matter-of-
factly that the PA is charged with defending the rights of the ejidatarios and comuneros
with respect to the right to use and enjoy their lands, and to transmit the rights over them
as well as having the fundamental duty to promote the certification of ejidal and
Agricultura y Recursos Hidrulicos, Registro Publico de la Propiedad, Colegio de
Notarios, Seduver (Baitenmann 1998:120 fn.26).
48 Votes were manipulated as a result of the institutional overlap, which,
... made it difficult to understand who had jurisdiction over what. And it is
in this context that government agencies were able to reproduce the old
clientelistic control mechanisms: government support in exchange for


59
In terms of social performance the development picture is also somewhat clouded,
since the determination of social indicators of development is also quite subjective. Little
consensus exists over which indicators are most important, data from any developing area
are subject to serious shortcomings in terms of reliability and older historical data are
fraught with even more deficiencies. Nonetheless, the customary portrayal of Latin
American social development during the 1950s through the 1980s is overly dour (Teitel
1992). If one examines such indicators as life expectancy, nutrition, adult literacy,
university or tertiary education and others, Latin Americas social development under the
ISI period ranks better than or similar to other developing areas (Teitel 1992: 360).
Social indicators such as life expectancy, infant mortality and illiteracy rates show
positive changes during the ISI period (Lustig 1993:69). Despite structural flaws in Latin
American economies, although in different and unfair proportions, major social sectors
managed to improve their living standards during the whole postwar period until the
1980s (Sunkel 1993:41). During the 1960s the proportion of households below the
poverty line declined (Lustig 1993:668-69). Latin American schooling and nutrition also
improved during the ISI era (Lustig 1993:69-70).
In sum, the period of state-led development in Latin America coincided with high /
rates of GDP growth and average or better than average social development when
compared with other developing areas (Alexander 1995 [1990]; Brachet-Marquez 1994;
Grindle 1994; Lustig 1993; Sunkel 1993; Teitel 1992). Given that the assessments of
development in Latin America in the decades following World War Two are varied and
frequently quite positive, why did so much of the region switch its overarching
development model during the 1980s? What factors led to these broad policy shifts?


THE INFLUENCE OF STATE INSTITUTIONS ON THE IMPLEMENTATION OF
NEOLIBERAL REFORMS: EVIDENCE FROM THE MEXICAN CASE
By
DIANE MICHAELLE JUST
A DISSERTATION PRESENTED TO THE GRADUATE SCHOOL
OF THE UNIVERSITY OF FLORIDA IN PARTIAL FULFILLMENT
OF THE REQUIREMENTS FOR THE DEGREE OF
DOCTOR OF PHILOSOPHY
UNIVERSITY OF FLORIDA
1999


167
The ultimate goal of this set of neoliberal reforms was to increase capital in the
countryside. In August 1992, NAFTA was signed, and it later went into effect on January
1, 1994.12 The ejido reforms fit into a package of neoliberal reforms planned for the
Mexican countryside in the early 1990s. These reforms were intended to cause a series of
interrelated changes, with the overarching goal of increasing productivity and efficiency:
The rhetoric of neoliberal policies aimed at the agricultural sector involves
arguments for deregulating and expanding free markets, enhancing
tenure security, attracting investment, eliminating state paternalism, and
reducing the states role in the countryside. These measures are supposed
to increase productivity and efficiency. Ejido reform fits into this vision
based on the following line of reasoning: certifying ejido land and
establishing the juridical framework for privatization would enhance tenure
security, which would attract private investment. Greater tenure security
would facilitate producers access to credit. These infusions of capital
would increase productivity and efficiency as producers were increasingly
driven by the logic of unregulated markets. Producers who were unable to
gain access to capital would rent or sell their parcels, thus putting the land
to a more efficient use. (Goldring 1998:146)
How closely did the actual implementation of neoliberal reforms match these
neoliberal plans? Many researchers have been curious about the ultimate effect of these
significant reforms. In order to closely examine and document these anticipated changes,
the Center for U S Mexican Studies at the University of California at San Diego
launched the multidisciplinary Ejido Reform Research Project in June 1992. This four-
year collaborative research project aimed to document the short-term impacts of ejido
reform and other policies affecting the rural sector (Cornelius and Myhre 1998:11). What
was the outcome of this significant research project? There are important regional
12 For a discussion of the status of NAFTA, see Rich and de los Reyes, eds., NAFTA
Revisited: Expectations and Realities (1997).


61
its state-led development policies implemented after the Great Depression. In the early
1980s structural adjustment programs brought pressure to reform many state institutions.
The size and number of state institutions has already been cut and / or is still being cut in
many countries.
As introduced briefly in Chapter 1, neoliberal recommendations included adjusting
domestic economies, reducing barriers to free trade and slashing the involvement of the
state in the economy. Neoliberal theories advocated fundamental changes in the roles of
state and market. Dietz critically summarizes the neoliberal perspective as the apparent
generalized...assertion that state intervention into the economic sphere is by nature
inefficient and incapable of positively contributing to the development project (Dietz
1995b: 192). His criticism is harsh, and may be valid for only a handful of the most
extreme neoliberals, but it does capture the spirit of the strongest critics of the Latin
American populist state. After the debt crisis, neoliberal views gained force and IS1 lost
credibility:
The consensus post mortem view held the whole complex of import-
substitutions policies responsible for what was essentially a crisis of
overspending exacerbated by the fickleness of international capital markets.
It became commonplace to view the debt crisis as the consequence of
import-substitution (inward-oriented) policies. The intellectual ground
was therefore cleared for the wholesale reform of prevailing policies in
Latin America, Africa, and Asia. Orthodox economists who had the ear of
policy makers now had their chance to wipe the slate clean and mount a
frontal attack on the entire range of policies in use. (Rodrik 1996:16-17)
The fall of the Iron Curtain and the breakup of the Soviet Union in the late 1980s and
early 1990s added further support to the idea that the market is far better suited to drive
an economy than is the state. The expectations were that the change in state influence
would cut the incidence of corruption and other non-democratic practices, since economic


ACKNOWLEDGMENTS
Without the unwavering assistance of a number of very special individuals, this
project would never have been possible. First and foremost I would like to thank my
advisor, Dr. Philip Williams, for his support throughout this process. I owe him a debt of
gratitude for his advice, direction and boundless patience. He has especially encouraged
me to look at labor issues that 1 might otherwise have neglected, and this project is far
better balanced as a result. I am also enormously grateful for the help of each of my
committee members, who have contributed in different ways over the years to the
completion of this work. Dr. Leann Brown has compelled me to organize my thoughts
more coherently, and to think critically about definitions and methodology. Dr. Goran
Hyden has provided crucial comments on several drafts at different stages of completion,
and motivated a reorganization of my theoretical discussion. Dr. Michael Chege has been
at hand to discuss the direction of this work, and has aided my conceptualization of
institutional theories. Dr. Clyde Kiker has provided insights about the logical development
of my arguments, and stuck with this project even when it moved in a direction that lies
outside his usual interests. I would also like to thank Dr. Steven Sanderson, my advisor
during the early stages of this project, for helping to bring me to the University of Florida,
spurring my interest in development issues, and guiding my study of Latin America.
Enormous thanks go to my parents, Dr. and Mrs. John J. Just, for their love and
support through the ups and downs of writing, and for reading and commenting on drafts.
IV


60
The answer for Latin America may best be understood with the aid of a historical
perspective on economic development after the 1960s, particularly in viewing the
difficulties which came to light in 1981/1982 with the onset of the debt crisis. The ISI
model began to falter after the 1960s, when many of the most obvious substitutions had
already been accomplished (Alexander 1995:159). Yet even during the years following the
first oil shock in 1973, many countries borrowed heavily, enjoying low interest rates on
loans for development.
As early as the 1970s, a consensus about the importance of market-oriented
reforms was growing ( Valds-Ugalde 1996:57). With the onset of the second oil shock
in 1979, however, credit tightened and free-floating interest rates soared. 11 Latin
American states continued to borrow despite the high interest rates attached to loans.
This continued until 1982, when Mexico declared a moratorium on its debt payments.
Credit became completely unavailable, forcing Mexico and other Latin American states to
cut spending in response to the demands of Bretton Woods lending institutions. To
qualify for the receipt of loans from the IMF and the World Bank, states had to adopt
economic stabilization programs followed by structural adjustment programs (SAPs).
Neoliberal policies were the recommended solution to the economic problems faced by
Latin America and other developing areas, as explained below.
The Spread of Neoliberalism
Latin Americas apparent widespread acceptance of neoliberal national
development policies (beginning with Chile in the 1970s) represents a major switch from
11 For a discussion, see Teitel (1992).


6
interferes with their success? Ultimately, how neoliberal are national neoliberal policies
when put into in practice? Do discrepancies exist between national policy goals and
subnational policy implementation? Does neoliberalism inadvertently coexist with other
development policy models?
Proponents of the Washington Consensus also had occasion to pose similar
questions to themselves during the 1990s. By 1998-1999, neoliberalism has lost a great
deal of credibility even at the IMF and the World Bank. The neoliberal message itself has
changed:
... [N]eoliberalism has evolved over time, passing from its savage
capitalism phase at the start of the debt crisis, in the heyday of Ronald
Reagan and Margaret Thatcher, to a kinder, gentler neo-liberalism in the
1990s. To varying extents, neo-liberals have rediscovered the issue of
poverty, and the need to educate their citizens. At least at the level of
rhetoric, few politicians would now admit to being a neo-liberal, as the
social market has become the catchphrase of the caring 1990s. (Green
1995:177)
Even a recent World Bank (1998:11) policy research report acknowledges the
transformation from pure neoliberalism, calling its heyday,
... a brief period when government failure was seen as pervasive and
complete, and markets (if not the solution) as the only hope.
Todays...viewpragmatic but not ideologically satisfyingis that both
markets and governments have pervasive failures but that these usually are
not complete. This emphasizes that government should focus on areas
where the problems in the absence of intervention are greatestbut
government must have the capacity to improve the situation.
Perhaps the ultimate challenge to neoliberalism surfaced with the Asian economic
crisis that came to a head in Thailand on July 2, 1997, and the economic crises which
subsequently touched Russia, Latin America and even the industrialized nations (Rodrik
1998). The loss of credibility of the East Asian model hits close to the heart of neoliberal
reassessments of their recommendations. The economic performance of the four East


184
town of poor, barefoot, non-Spanish speaking Zapotee Indians. The story
is repeated by people as young as 20 or 25 years old as part of their
cultural history. For younger ejidatarios, this story is part of their identity
in belonging to the ejido even if their experience of being an ejidatario is
very different. .(Stephen 1994:19)
Nonetheless, the position of younger ejidatarios is more ambiguous than that of older
ejidatarios who have deeper and personal ties to the struggle for ejido land and for whom
ejido membership historically meant some relief from poverty. The sale of ejido lands
will most likely not occur immediately, but instead will most likely become an issue
when the current generation of ejidatarios is forced to further divide land plots among
their children (Stephen 1994:27). This conversion is likely to be fairly slow, in reflection
of the dwindling significance of the ejido over time.43
This process will also likely be affected by the potential for profitable production
in the region, as was the case in Chile. In Chile, as noted previously, land sales were less
common in areas better suited to growing traditional crops than those suited for export
production. Since many ejidal lands are marginal and not irrigated, the benefits of
remaining organized as ejidos may outweigh the incentives to privatize for quite some
time.
In addition to the slow privatization of ejidal lands, capitalization of ejidal lands is
characterized by other delays unanticipated by neoliberal planners. Capitalization was
expected to deepen through the use of joint ventures between the private sector and
43 Stephen hypothesizes about the timing of sales of ejidal lands:
Given the important differences in historical consciousness, labor
socialization, and size of farming plots available to the two generations of
ejidatarios (those above 40 and those below) large-scale selling of ejido
land will most likely not take place immediately, but slowly over the next
15-20 years as younger people inherit land from their parents. (Stephen
1994:27)


99
percent in 1973-1976, and reached 14.1 percent in 1981 (Lustig 1998:18,22). Foreign
debt ballooned, the importation of consumer goods rose and inflation accelerated from
28.7 percent in 1981 to 98.8 percent in 1982 (Lustig 1998:40). In the 1981/ 82 debt
crisis, capital flight was continuous, and Mexico at first attempted to sustain the value of
the peso through short-term external borrowing (Lustig 1998:24). In August 1982,
Mexico suspended payments on its debt, an event that marked the end of an era of easy
borrowing for developing countries (Lustig 1998:25). ^ The lost decade of
development of the 1980s had begun for Latin America.
As economic strategies were reconsidered during the 1980s, corporatist strategies
gained new critics both nationally and internationally. Nationalist economic and political
development strategies are considered inappropriate in the neoliberal late 20th century.
Neoliberal reforms aim to dismantle both the nationalist economic policies (i.e., ISI) and
the nationalist political policies (i.e., a corporatist rather than liberal basis for a countrys
sociopolitical organization) of earlier decades.
What comprises this inappropriate sociopolitical organization in Mexico? At
the top of the pyramid is the PRI / state. Mexican corporatism is not an ideal type of
corporatism, because not all organised groups in society are affiliated to the PRI
(Craske 1996:80). Instead, three main groups have historically been incorporated (labor,
peasant and popular). As introduced above, their incorporation into the government was
Repudiating the extremes of liberal individualism, the corporatists
sought to reconstruct state and society on an organic basis. (Wiarda
1981:129)
1 3 For an excellent study of the Mexican economy from the precursors to the debt crisis
through the late 1990s, see Lustig (1998).


159
...the development of horizontal mechanisms of collaboration between the
beneficiaries. By destroying rural isolation, the campesinos would then
understand that they formed part of a broad social sector and that through
national confederations they could fight for their common interests against
those of the landholding sector. In sum, there was an attempt to create a
consciousness of their campesino condition. (Silva 1991:21)
This dynamic was sharply reversed under the military regime of General Augusto
Pinochet in 1973, as agrarian counter-reform began and 30 percent of the lands were
returned to their former owners (Carter et al. 1996:39). Following neoliberal ideals, the
policy of dismantling of asentamientos was pursued between 1973 and 1979 in order to
privilege private entrepreneurs as well as to expel radical campesinos from agriculture
(Silva 1991:21). Eleven percent of asentamiento land remained in asentamiento
cooperatives but forty-one percent of the asentamiento lands were allocated to individual
beneficiaries as private plots or parcelas by 1979 (Silva 1991:24). This provided 36,533
families with parcelas averaging 10 basic irrigated hectares (BIH), but excluded 50.2
percent of the campesinos who had benefited from agrarian reform (Silva 1991:24).
Agrarian counter-reform in Chile thus involved both dismantling the asentamientos
that had been institutionalized during a 6-year period, and an overt undoing of the informal
norms and values that Chilean campesinos had embraced, such as peasant unionism or
solidarity about their campesino condition. As Kay explains,
The savage capitalism of the Pinochet years.. .made it possible greatly to
accelerate the capitalist transformation in the Chilean countryside, as all
social and political obstacles which could have slowed down or hindered
such a process were violently removed. (Kay 1993:25)
Campesino solidarity was fatally undermined by the struggle to qualify for receipt of a
parcela, a process tainted by anonymous informers and systemic abuse, including the use
of the system to settle old personal or political disputes (Silva 1991:21, 26). The policy of


211
institutions influence the implementation of development policies. The findings confirm
the influential role of institutions, and suggest that development policies should be
designed with greater attention to the institutional context. 1 Indeed, policy makers should
reconsider the appropriateness of neoliberal policies, since successful implementation is
hampered by state institutions.
This chapter begins by condensing the institutional effects discussed in previous
chapters, in order to showcase the variety of institutions that impact the implementation of
neoliberal reforms. The relative significance of particular institutions is considered in
order to add coherence to these findings. The impact of these institutional effects on
development in general is also discussed The study concludes with a consideration of
future avenues for research
Summary of Institutional Effects
In Chapter 2, a review of a variety of institutional approaches concluded with the
selection of a mid-level perspective, historical institutionalism, which would be bolstered
by selective insights from macro- and micro-levels of analysis. The historical
institutionalist perspective has helped to convey the ways that institutions shape both the
choices available to individuals and the decisions made by them. From a more macro-level
of analysis, corporatist state-society relations have been shown to result in patterns of
behavior visible in state institutions. In turn, those corporatist institutions have had many
effects on the implementation of neoliberal reforms. At the lowest level, the micro-level of
analysis, the beliefs of individuals have interacted with the two higher levels to affect
The World Bank and the IMF are now are building institutional reform, rule of law,


BIOGRAPHICAL SKETCH
Diane Michaelle Just received her Master of Arts in political science from the
University of Florida. She received her Bachelors of Arts in international studies from the
University of North Carolina at Chapel Hill. She has worked, served as a volunteer and
done research in Mexico and Chile.
260


102
Peculation involves government officials creaming off spoils. This may be
systemic to the extent that the spoils system is used to reward members of
the political elite..., thus ensuring loyalty and averting rebellion. Such a
system could be denoted modern patrimonialism. As a short term
solution.. the system may prove functional.... In extreme forms, such
peculation can reach sultanistic proportions, thus incurring popular
resentment and political illegitimacy. At best, therefore, government at
the service of graft is a risky, short-term political expedient.
In contrast, . .graft at the service of government is more systemic and
system-maintaining. It involves the use of corruption to perpetuate the
entire political order...its practices collective rather than individual...
However, it assumes two contrasting forms, which may be termed
coercive and allocative, or, more colloquially, the stick and the
carrot... (Knight 1996:227)
Thus the difference between the two types of corruption lies in whether (1)
rewards are only available to a very limited elite and are key to maintaining their loyalty,
or whether (2) for example, bribery is expected by all who interact within the system and
loyalty is assumed because using the system is the only existing way to achieve ones
needs. The latter type, which is more common in Mexico than in other corrupt Latin
American states, is more stable, perhaps even more democratic (Knight 1996:227).
Graft at the service of government is an institutionalized norm in Mexico, evident in
both formal and informal interactions (Knight 1996). This type of corruption persists
despite democratic reform efforts (Morris 1991).
The so-called carrot and stick supports the Mexican corporatist system. It is
often difficult to distinguish where acceptable, legal interactions leave off and corrupt,
illegal interactions take over. Thus government patronage is at times legal, at times only
formally legal, and at other times flatly illegal. The expectation of continued patronage is
an institutionalized norm in Mexico throughout the 20th century. This norm interferes with
the implementation of neoliberal reforms in Mexico, as will be examined in Chapters 5 and


191
The Influence of the CNC, the FNOC and the IMSS
Although the ejido is the state institution with the greatest impact on neoliberal
reforms in the agrarian sector, other state institutions also play significant roles. This
section will briefly review ways in which CNC, the FNOC and the IMSS (the Mexican
Social Security Institute) limit the impact of neoliberal reforms.
As noted earlier, almost three-fourths of all agrarian groups belong to the CNC.
When the government first proposed the new agrarian reforms on November 1, 1991, the
CNC responded with a series of provisions that it considered necessary for incorporation
into the new agrarian laws {Secretara de la Reforma Agraria 1998:81). These included
demands to prohibit latifundios and to conserve the inalienable, unrestricted
(inembargable) and indescribable characteristics of communal and ejidal properties
{Secretara de la Reforma Agraria 1998:82). Thus the CNC acts to preserve the
historical role of the ejido. The CNCs general stance against latifundios reveals its
opposition to the neoliberal concept of operating production according to the most
profitable economies of scale rather than in ways that seek to accommodate the millions
of small-scale agriculturalists living in the countryside at present. Hence the CNC
defends values which contradict neoliberal ideals on some levels.
A study of the agrarian sector in the state of Puebla reveals the influence of the
CNC, the FNOC and the IMSS during neoliberal reforms (Otero 1998). Puebla has long
been an important site of sugar production in Mexico, but production in the 1980s was
very inefficient. The goals of the neoliberal reforms included increased access to credit,
enhanced efficiency by both sugar industrialists and cane growers, and crop
diversification (Otero 1998:92, 96). The privatization of sugar mills began in 1988, but


128
would raise domestic public debt from 28 percent to 42 percent of GDP (Anderson,
Washington Post. August 7, 1998).
The bailout is strong evidence of the continuation of long-standing agreements
between big business and the government.9 Clientelistic ties between banking elite and
the PRI/state are latent in the expensive bailout:
Citing banking secrecy laws, finance officials have refused to release the
names of companies and individuals who defaulted on debts that the
government subsequently took over under a program that kept Mexicos
banking system from collapsing. The secrecy has fueled suspicion that the
bank bailout amounts to a scam by power brokers in the ruling Institutional
Revolutionary Party (PRI) to line their own pockets and protect their
friends. The scandal has already grazed [Mexican President] Zedillo, the
head of the central bankthe Bank of Mexicoand several presidential
hopefuls. (Anderson, Washington Post. August 7, 1998)
Accusations of clientelist political corruption abound (e.g., Tricks, Financial Times
of London. August 10, 1998). The public visibility of the continued clientelistic ties
between powerful business interests and the PRI / state also serves to perpetuate a belief
in clientelism as a way to achieve ones personal goals. The governments bailout of the
bank was in line with the clientelistic relations institutionalized in its past. The bailout
program took over 7.7 billion dollars worth of questionable or illegal loans, including 4.4
billion in loans that the banks had given to other entities with which they had direct
business relationships (Dillon, New York Times. July 22, 1999a). The scope and scale of
this incident leave little room for doubt about the continued significance of these
9 One analyst criticizes the depths of these connections by asserting that During almost
seven decades in power, the ruling Institutional Revolutionary Party (PRI) has cultivated
ties with the business elite and stonewalled opposition-led corruption probes (Tricks,
Financial Times of London. August 7, 1998).


89
redesigned the party, and its name was changed to the Partido Revolucionario
Institucional (PRI). The partys theme was changed from the PRMs For a Democracy
of Workers to the PRIs Democracy and Social Justice (Brandenburg 1964:101). The
institutionalization of the PRI and its relationships with the three key sectors (labor,
campesinos and the popular sector of civil servants and others) has had an extremely
influential effect on Mexican political life for more than five decades, as will be discussed
further in the section on corporatism.
PRI-state fusion makes pinpointing the locus of power difficult. For example,
scholars such as Camp (1993) suggest that the state, rather than the party, is the more
powerful of the two.9 Yet other analysts argue that the party holds the power. Topik
(1993) for example, remarks that the PRIs power has long been considered exceptional
when compared with other parties internationally. He comments that in 1992/93:
.. the PRI still seems to be the most secure political party in Latin
America. Indeed .. the PRI is the longest standing hegemonic party in the
world. This comes as a puzzle after reading these articles which all dwell
on the partys lack ofmodernity, lack ofinstitutionalization, declining
legitimacy, and authoritarianism. Clearly, Mexicos political leaders have
been doing something right. It would be worthwhile studying them. We
need to know...why these political regimes persisted so long in the face of
so many apparent obstacles. (Topik 1993:287)
9 Camp argues:
,..[T]he Party leadership is selected by the president, thus placing the Party
under the thumb of the executive branch. The Party relies on the executive
branch for financial support; generally, the Secretariat of Government
allocates the funds. The support is difficult to measure because it involves
more than money. The government, through its contacts, provides many
other resources, such as lodging, transportation, and meals for those doing
Party business. (Camp 1993:142)


233
Transformation of Rural Mexico: Reforming the Ejido Sector. U S. Mexico
Contemporary Perspectives Series, 12, San Diego / La Jolla: Center for U S.--
Mexican Studies, University of California.
Aragn, Ernesto, Claudia Dorado, Javier Benavente, Veronica Marcelino and Maria
Teresa Pinero de Ruiz. 1994. The Crisis of the Welfare State and its Influence on
Latin America in North-South Relations, in Stuart S. Nagel, ed., Latin American
Development and Public Policy. New York: St. Martins Press.
Arrow, Kenneth. 1963. Social Choice and Individual Values. Cowles Foundation
Monograph, 2nd ed., New Haven: Yale University Press.
Aspe, Pedro. 1993. Economic Transformation the Mexican Wav. Cambridge: MIT Press.
Assessing Aid: What Works. What Doesnt, and Why. 1998. A World Bank Policy
Research Report, New York: Oxford University Press.
Bailey, John and Sergio Aguayo Quezada, eds. 1996. Strategy and Security in U.S.-
Mexican Relations beyond the Cold War. U S.-Mexico Contemporary Perspectives
Series, 9, San Diego, CA: Center for U S.-Mexican Studies, University of
California, San Diego.
Baitenmann, Helga. 1998. The Article 27 Reforms and the Promise of Local
Democratization in Central Veracruz, in Wayne A. Cornelius and David Mhyre,
eds., The Transformation of Rural Mexico: Reforming the Ejido Sector. U S.
Mexico Contemporary Perspectives Series, 12, San Diego / La Jolla: Center for
U S Mexican Studies, University of California.
Bardhan, Pranab. 1989. The New Institutional Economics and Development Theory: A
Brief Critical Assessment. World Development. 17(9). 1389-1395.
Barry, Tom. 1995. Zapatas Revenge: Free Trade and the Farm Crisis in Mexico. Boston:
South End Press.
Bartra, Armando. 1996. A Persistent Rural Leviathan, in Laura Randall, ed. Reforming
Mexicos Agrarian Reform. Armonk, NY: M E. Sharpe.
Bates, Robert H. 1989. Beyond the Miracle of the Market. Cambridge: Cambridge
University Press.
1994. Social Dilemmas and Rational Individuals: An Essay on the New
Institutionalism, in James M. Acheson, ed., Anthropology and Institutional
Economics. Monographs in Economic Anthropology, no. 12, Lanham, New York,
London: University Press of America.


Number of Ejidos and Agrarian Communities
Figure Two: Universe of Ejidos and Agrarian Communities Certified and Titled by PROCEDE 1993-1999 with
Predictions through 2016
A Universe of Agrarian Groups (93-97 = ejidos only, 98-99 = ejidos and agrarian
com m unities)
' Agrarian Groups Certified
^"Logarithmic Regression of Agrarian Groups Certified
Linear Regression of Agrarian Groups Certified
Years
1993-2016
-J
4^


156
agrarian sector. Both Chile and Nicaragua experienced the parceling of collective agrarian
reform lands in recent decades (Jonakin 1996:1179). This comparison will draw out the
differences in the institutional heritages of agrarian reform in each country. It will suggest
the ways neoliberal reforms can be influenced by institutional factors, and provide a
context for the discussion of the Mexican counter-reform that follows.
Nicaragua: Sandinista Agricultural Cooperatives
Agrarian reforms broke up large haciendas in an effort to put land in the hands of
producers and promote rural development by putting a larger percentage of land to use.
Agrarian reform took place under the Sandinista Front of National Liberation (FSLN) in
Nicaragua from 1979 to 1990 (Enriquez 1997). The Sandinista Agrarian Reform (SAR)
set up Sandinista Agricultural Cooperatives (CAS), upon which land was worked
collectively.
During the 1980s, CAS members came to prefer working the land on a household
basis, and after the February 25, 1990 electoral defeat of the FSLN, parceling of CAS
lands proceeded at an accelerated pace (Jonakin 1996:1180). Jonakin finds that after
three years, only 40 percent of 53 surveyed CAS were still organized as collective
s'
enterprises, with the other 60 percent having parceled their lands (Jonakin 1996:1180).
However, few of the families on parceled CAS land had obtained fee-simple titles which
establish formal private ownership of the land area and make it freely transferable (Jonakin
1996:1180). By the summer of 1993, only around 6 percent of the membership of the
surveyed CAS had sold their lands, accounting for 6.5 percent of the land area (Jonakin
1996:1186). Whereas 34 percent of (surveyed) parceled CAS had some members who had
sold land, only 10 percent of (surveyed) collective CAS had some members who sold land


225
original plans were considered fair, the outcomes that have resulted have proven more
difficult to justify.
If, as has been discussed here, the implementation of neoliberal reforms is taking
longer than originally anticipated and additional reforms are needed, the factors
responsible for the delays should be studied carefully. Frequently, the causes of the delays
are formal and informal institutions. In interpreting the significance of the maintenance of
formal and informal institutional power by the state, such control should be perceived of
as varyingly harmful or beneficial. This challenges the neoliberal assumption that the role
of the state must necessarily continue to be reduced, but it stops short of arguing across
the board that the reforms of the state have gone too far. Instead, it suggests that any
institutions that have survived the cuts might on the one hand be deserving of closer
attention. Such institutions may play an important role in advancing development.
Rational choice theorists often argue that the persistence of an institution depends upon
the benefits it can deliver."* While it may be true that this is sometimes the case, a
historical institutionalist would argue instead that some of these institutions may be doing
much more harm than good (if, for example, they perpetuate damaging patronage systems
of political favoritism). Thus the impact of state institutions on development is somewhat
ambiguous.
Sometimes situations arise in which an institution buffers the short-term costs of
neoliberal reforms on the poor. If this is the case, it is more difficult to generalize about
the desired future institutional condition for development. Policy-makers must choose
4 Hall and Taylor (1996:952) provide this summary of the rational choice perspective.


44
The conceptual linking between levels of analysis suggested by scholars such as
Hall and Rothstein works well for the present analysis as well. These macro- and micro
level analyses can be linked in a similar manner. From a macro-level, state-society
relations are described as corporatist, that is, the state has a relationship with vertically
organized societal groups that is defined by varying degrees of power and compromise.
Corporatist concepts about the relations between state and society explain the
administrative structure and capacity of the state and they are visible in the patterns and
behavior of specific state apparatuses (Rothstein 1996:33). In discussing empirical
details, reference is made to the impacts of corporatist institutions of the state (see
Chapters 5 and 6). This draws attention to the impact of macro-level structures (such as
the corporatist organization of state-society relations) upon more mid-level and micro
level structures and processes. For the mid-level of analysis, a historical institutionalist
approach is taken. Useful micro-level analysis is found in the study of policy
implementation.
A variety of insights from the study of policy implementation will add to the
interpretation of the empirical subject matter of this study at the micro-level. The capacity
to implement policies depends upon the legitimacy of the agency in charge of
implementation:
The very process of implementation can be the critical question, especially
if the policy takers are an organized interest group whose participation is
needed for successful implementation. One way of achieving this
legitimacy is to grant such groups semiofficial status (and not merely in
policy formulation, but also in implementation. (Rothstein 1996:37)
This explains how some groups become affiliated to the state, and subsequently impact the
success or failure of state policies. Thus incorporation may be used as a means of aiding


180
affect another 1,588 agrarian groups.38 For example, in Chiapas the Zapatistas39
invoke symbols of the Mexican Revolution in their demands for continued agrarian
reform (Stephen 1998a). These struggles prevent the completion of PROCEDE in the
area:
In Chiapas the use of historical national symbols in the service of
indigenous struggles has so altered the structures of political and economic
power that the government has given up implementing PROCEDE in
Zapatista territory. (Stephen 1998a:23)
Even in ejidos where members accept PROCEDE, the process of titling involves
many steps that end up being stumbling blocks. For example, defining property
boundaries and assigning plots is often difficult for reasons of historically
institutionalized land use, as described above. Furthermore, in ejidos that do complete
the titling process, an even more significant barrier to capitalization in the countryside
exists: receiving titles does not mean that landowners will use the titles to sell their land.
Quite to the contrary, preliminary evidence suggests that few ejidatarios are privatizing
their land immediately after receipt of titles (Cornelius and Myhre 1998:12).40 Instead,
the process of privatization lags far behind.
The current lack of progress toward titling is a sign that ejidatarios will want to
keep the ejido structure in place even if they do eventually complete the titling process
(Jones and Ward 1998; Lpez Sierra and Moguel 1998; Stephen 1998). In Oaxaca, for
3 8 Secretara de la Reforma Agraria 1998:109.
39 The Ejrcito Zapatista de Liberacin Nacional (Zapatista Army of National
Liberation or EZLN) are a group of armed insurgents who took over 4 cities in Chiapas
on January 1, 1994. They continue to occupy territory in Chiapas and have a variety of
unmet demands. Efforts to bring peace to the region have failed.
40 Data on the total number of lands that have been converted to private property has not
yet been published by the Mexican government. Field researchers in several states have
found extremely low percentages.


71
international pressures. It has been in Latin American governments best interests to
advance the view that neoliberal reforms have been extensively and successfully applied,
and that any newly formed formal institutions do not demonstrate the characteristics that
led their predecessors to be discarded. External pressures are lessened in part through the
(internationally-broadcast) public acceptance by national policy makers of neoliberal
reforms.
Despite the increase in neoliberal rhetoric during the 1980s, neoliberal reforms
tended to lag behind. During the 1990s, neoliberal reforms did deepen and become more
widespread. Nonetheless, even Edwards (who frequently emphasizes change during this
period) admits that as of 1995, only in
Chile and Argentina, [were] the reforms.. already bearing fruit in the form
of accelerated growth, rapid improvements in productivity, and higher
wages. Other countriesEcuador, Nicaragua, and Peruhowever, only
initiated the implementation stage in the early 1990s, while a small group,
of which Brazil is the most prominent case, had barely taken the first steps
on the reform path by early 1993. (Edwards 1995:9)
In the 1990s the literature documenting the decline of the Latin American state grew, and
the voices of different interpretations of Latin American political economy were heard less
frequently. Yet contradictions still existed between publicly pronounced national
development policy goals and the actual policies subsequently being implemented in many
cases (Manzetti 1994:44).
Institutionalized interactions have significant effects on development during
neoliberal reforms (Grindle 1996). The plans theorized by economists came up
against the realities of the institutional context of different countries (Grindle


82
called) was characterized by limited political unrest and a greatly reduced foreign debt, but
also by extremely high infant mortality and low life expectancies (Cumberland 1968:190-
191). Railroads and mining expanded, but illiteracy was at about 90 percent (Handelman
1997:11). Fraudulent land surveying practices created huge haciendas for a small wealthy
minority while impoverished campesinos made no progress in the acquisition of lands, and
even lost control over the lands they did cultivate (Cumberland 1968:201). By 1900, 97%
of the fertile land in Mexico was held by 1% of the population; meanwhile 82% of the
t
rural population was landless (Warnock 1995:22). Foreign investment soared, as
economic policies favored external actors, especially Americans, over Mexican citizens.
By 1910, two-thirds ofMexicos investment came from abroad (Heilman 1978:2). The
Revolution began as a result of discontent by a wide array of actors in this social milieu.
The discussion of the historical influences that follows is limited to post-
Revolutionary phenomena, since the most significant effects visible today are the result of
changes since the Mexican Revolution. 2 Many formal and informal institutions of the
Mexican state were shaped by events that occurred in the aftermath of the Revolution. By
understanding the historical significance of their foundations, it is easier to make sense of
institutional continuities that shape the present and the future in Mexico.
2 Frank Tannenbaum explains that The government, the constitutional system, the army,
the courts, the landholding system, peonage, and many things besides were swept away by
the revolutionary tide (Tannenbaum 1964:vii). Given this vast social and political
change, the institutional heritage surviving this upheaval was limited, and the remnants of
influence retained have since been withered by time, reform and efforts at modernization.
Although this heritage is not entirely irrelevant to the present discussion, further
examination of these phenomena are most appropriately reserved for another study.


56
sharp downturn in overall GDP growth occurred in the 1980s, with a negative per capita
change in growth for the region as a whole. Critics maintain that several decades of ISI
created nationally-subsidized industries that were inefficient and could not compete
internationally, and that such industrial growth created short-term gains at the expense of
long-term prosperity and economic stability. Politically, they argue, ISI empowered
sectors and individuals close to the ruling party, thus undermining the development of
democratic politics throughout the region. The impact of this historical period is still
being experienced. With the hindsight of the late 1990s, the shortcomings of the period of
ISI development seem in significance to be matched by the shortcomings of the neoliberal
reforms that followed.
The Latin American populist state took a variety of forms in the post-World War
Two era. Despite variety in the style of governmental leadership, in general the state was
fairly strong and active, taking responsibility for national economic development through
ISI policies. The assessment of institutionalized political capacity is relevant to the
evaluation of development in the region at the time.
State capacity includes many features. State capabilities are the basic
administrative and coercive functions of the modern state (Mauceri 1995:10). Three
arenas of state power exist: the states own organizational structure, the states ability to
influence the behavior of societal actors, and the states relation with other states and
supra-state actors (Mauceri 1995:10-11). A variety of indicators of state power exist,
including: state administrative presence; the ability to regulate the economy and administer
have created repressed and inflexible economies. (Lai 1994:199 [Reprinted
from Lai in Barry and Goodin, eds., 1992.])


146
The informal institutions governing the state-labor alliance have served in some respects to
advance the reforms but in other ways they have limited the transformation to more liberal
relations with labor, and have served instead to perpetuate an authoritarian system. In the
long-term a continued role for informally institutionalized state-labor relations is both
possible and likely.
The Federal Labor Law: A formal state institution affecting the labor sector
Just as the informally institutionalized state-labor alliance reveals historical
continuities that influence neoliberal reforms, formal state institutions are also significant
during the reforms. Labor legislation also hinders neoliberal reforms in the labor sector
(Bierma 1998; Cervantes 1999; Dvila Capelleja 1997; de la Cruz (1995); Pozas 1996;
Vargas and Velasco 1999; Zapata 1996). The Ley Federal de Trabajo (LFT), or Federal
Labor Law, dates back to 1931, and influences the outcomes of neoliberal reforms at the
turn of the 21st century.
Historically, business groups have opposed much of this type of labor legislation
on economic grounds. Beginning in 1989, the Mexican entrepreneurial sector sought to
undo the regulations on the labor force through reforms of labor legislation (Pozas
1996:138). Yet even in 1994 when some neoliberal reforms desired by business were
being implemented, most Mexican firms continued to take cues from traditional formal
and informal state institutions, as the following example reveals.
The Salinas administration (1988-1994), worried about the potential political
consequences of simultaneous drastic changes in labor legislation, did not change the LFT,
and instead:


103
6. One list of specific examples of government patronage includes programs initiated in
the 1920s as well as others functioning during the neoliberal 1990s:
agrarismo and labour reform in the 1920s and 1930s; a spate of Federal
programmes during the long economic boom of the 1950s and 1960s; oil
funded public works in the late 1970s; the ambitious Solidarity
Programme (PRONASOL) of the 1990s. (Knight 1996:229-230)
The use of PRONASOL as an example of a corporatist and perhaps corrupt institution is
especially significant. PRONASOL was a highly publicized national anti-poverty program
that was touted as an innovative, transparent means to overcome the clientelistic features
of disbursement of traditional social programs. Its inclusion into this list highlights the
ways historical clientelist and corporatist interactions affect contemporary political
interactions in the reformed, non- or neo-corporatist 1990s. The political
manipulation of PRONASOL is discussed in Chapter 6.
Corruption and corporatism remain embedded in the nature of even the present
Mexican political system. In this system of corrupt rewards, patron-client ties continue to
bolster the position of the PRI, adding to its remarkable longevity (Knight 1996:230).
The Mexican political system is a complex web of formal and informal interactions
institutionalized over many decades and renewed with each sexenio. 1 7 Institutionalized
patronage is significant even at the turn of the 21st century in Mexico. Clientelist
relationships are institutionalized, and the PRI/state has institutionalized both carrot and
stick forms of corruption. Mexican sociopolitical organization is an intricate mix of
corporatist arrangements supported by corrupt interactions carried out along patron-
17 Knight describes it as .. .a sophisticated system of patronage and repression, pan o
palo, coercive and allocative corruption, now run by a third generation of political leaders,
steeped in its compelling, idiosyncratic and largely unwritten rules (Knight 1996:231).


35
Historical Institutionalism
The new historical institutionalist school within political science is likened to the
old sociological institutionalism of scholars such as Selznick (1949) (Koeble 1995:236).
The contributions of Weber, and to a lesser extent, Durkheim, also influence historical
institutionalists. Institutionalist approaches vary in the significance they grant to the
influence of institutions on an economy, polity or society, but historical institutionalism
grants relatively more autonomous power to institutions than rational choice theories do.
It lends explanations that emphasize the legacies of institutions during development
processes (e g., Hattam 1993; Immergut 1992; Rothstein 1992 and 1996; Thelen and
/
Steinmo 1992). On the other hand, it stops short of suggesting that institutions vapidly
determine social outcomes.
The perspective of historical institutionalism is not always explicitly referred to by
scholars. Thelen and Steinmo (1992) provide a clear outline of this body of theory,
distinguishing it from and comparing it to the work of new political economists of the
rational choice school. Historical institutionalists focus on the importance of institutions
in forming and informing individuals choices, and how institutions in existence for long
historical periods can be very influential in shaping the thoughts of individuals (Thelen and
Steinmo 1992). Thus, the institutions that make up a particular environment over time
may have a more significant impact on development than the individuals living within that
environment at any one given time.
Historical institutionalization is the way that institutions take shape over time.
Institutions which have existed for decades are more entrenched, and thus more resistant
to change than newer institutions. Some state institutions may continue to function as


49
These questions delve into the meaning of the historical roles of both formal and
informal state institutions under the neoliberal project. Much literature from the 1980s
and through the mid-1990s presents the neoliberal project as one that will change (or is in
the process of changing) the role of state institutions quite rapidly under the strength of
neoliberal pressures. 1 However, at the turn of the 21st century, some analysts are
proposing a different outcome in the balance between state institutions and the market,
one that foresees the continuation of a very important role for the Latin American state in
national development.2
Beyond the question of whether some state institutions that contradict neoliberal
policy goals continue to thrive are other relevant questions. Are new institutions being
created to fulfill the informal commitments that the populist state has historically kept,
despite the fact that their new mandates essentially undermine parts of the neoliberal
project? Similarly, are older institutions being reborn with new names but identical
mandates?
This chapter will shed light on these questions by examining the status of the
reforms in a cross-section of Latin America. It argues that institutional phenomena limit
the successful implementation of neoliberal reforms. A historical institutionalist approach
provides the framework for this examination of development during the implementation of
neoliberal reforms in Latin America. The historical imprinting of institutions discussed by
Hannan and Freeman suggests a partial explanation for the abundance of state institutions
1 See, for example, Bergsten and Williamson (1994), Bhagwati (1991), Morales (1993),
Smith and Acua (1993).
2 For a discussion, see Burki and Perry (1998) and Bradford (1994).


77
This appears quite significant when one considers that the reforms had been a national
focus for more than a decade at the time the study was conducted. Other scholars have
reached similar conclusions about the success of neoliberal reforms (e.g., Burki and
Edwards 1996a; Burki and Perry 1997 and 1998; Cavarozzi 1994; Graham 1990;
Savastano 1995).
Some neoliberals have begun to speculate on the potential backlash that the lack of
progress of neoliberal reforms could create (eg., Burki and Edwards 1996a; Morrow
1998). Burki and Edwards, for example, note with great concern that,
The Latin American recovery is proceeding at a slower pace than was
anticipated by most analysts, ourselves included.
The slow recovery of the regional economies is troublesome for a
number of economic, social and political reasons. In many countries,
modest economic performance over the last few years is generating
impatience and a sense of disappointment with the reform process. An
increasing number of people are disillusioned and beginning to look at
policy alternatives. Although this disenchantment has not been translated
into an activist anti-reform movement, it is slowly generating reform-
skepticism. What makes this particularly disturbing is that the reform-
skeptics do not have a coherent plan and tend to offer an assortment of
mutually inconsistent policies with an unmistakable populist flavor. (Burki
and Edwards 1996a:2)
The discrepancy between the anticipated dates for successful completion of
neoliberal reforms and the realities of current delays must be understood more clearly.
The consequences of failing to rapidly and completely implement the remaining reforms
and realize the anticipated economic goals could have dire consequences. In order to
understand the source of some of these delays, closer examination of one Latin American
case will provide significant insight. Perhaps the most representative case is the case of
Mexico. Mexico is considered one of the strictest followers of neoliberal reforms, and yet,
the success of the reforms is still lacking (Edwards 1995; Frediani 1996; Savastano 1995).


160
parceling agrarian reform lands sought in theory (and even more so, in practice) to undo
the cooperative institutions that had been set in place during 1967-1973.
The rate of subsequent sales of parcelas in Chile was extremely high:
The number of parcels sold in the short period since 1973 has been
staggering, especially considering that agricultural land markets in other
countries (including Chile before 1975) have been fairly inactive. A study
conducted in 1979 by the Instituto de Capacitacin e Investigacin en
Reforma Agraria (ICIRA) indicated that about 15 percent of the land
reform assignees had sold their land by June 1978. Rough estimates
suggest that at least 30 percent of the parcelas had been sold by December
1979 (Jarvis 1981) and about 40 percent by the end of 1986 (Gomez and
Echeique 1988). A recent study on parcelero land sales estimates that at
the national level, 57 percent of the original 48,000 beneficiaries^ have sold
their land (Echeique and Rolando 1991). (Carter et al. 1996:39)
Both linear and logarithmic trendlines^ based on these estimates of sales of parcelas
suggest that the remainder will be sold by the year 2005.
The sales of parcelas are differentiated regionally according to differences in land
use (Carter et al. 1996). Sales were more prevalent in the northern Central Valley, where
production for export crops was the most profitable, and less common in areas better
suited to growing traditional crops (the policultura, or mixed-crop zone) (Carter et al.
1996:40). The decision to sell or keep ones parcela thus seems most dependent upon its
geographical location and the concomitant production in the region. Prior identification
9 Silva explains that around 90,000 parcels were originally proposed, but that the goal was
later reduced to 45,000 parcels and in the end 36,533 parcels were effectively allotted
(Silva 1991:25).
Linear trendlines reveal the potential outcome if sales continue at the average rate of
sales to date. Logarithmic trendlines also reveal a potential outcome, but are adjusted to
take into consideration any acceleration or deceleration in sales rates, adjusting the
predicted outcome accordingly. In the Chilean case, the rate of sales appears to be very
constant, with no significant acceleration or deceleration.


249
Nazmi, Nader. 1996. Economic Policy and Stabilization in Latin America. Armonk, NY
and London, England: M. E. Sharpe.
Nelson, Joan M. 1990. Introduction: The Politics of Economic Adjustment in Developing
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of Adjustment in Developing Countries. Princeton: Princeton University Press
A New Stage in the Mexican Agrarian Reform, 1997. Secretara de la Reforma
Agraria, (Noticias), Mexico (available via the Internet at http://www.sra.gob.mx/).
North, Douglass C. 1990. Institutions. Institutional Change, and Economic Performance.
Cambridge: Cambridge University Press.
Nurmi, Hannu. 1998. Rational Behavior and the Design of Institutions: Concepts.
Theories and Models. Cheltenham, UK: Edward Elgar.
Ocampo, Jos Antonio. 1995 [1993], Terms of Trade and Center-Periphery Relations,
in James L. Dietz, ed., Latin Americas Economic Development: Confronting
Crisis. Boulder, CO: Lynne Rienner Publishers.
ODonnell, Guillermo. 1973. Modernization and Bureaucratic Authoritarianism: Studies in
South American Politics. Berkeley: Institute of International Studies, University of
California
1994. Some Reflections on Redefining the Role of the State in Colin 1
Bradford, Jr., ed., Redefining the State in Latin America Paris: OECD
Olsen, Johan P. 1998. Political Science and Organization Theory: Parallel Agendas but
Mutual Disregard, in Roland Czada, Adrienne Hritier and Hans Keman, eds.,
Institutions and Political Choice: On the Limits of Rationality. Amsterdam: VU
University Press.
Olson, Mancur. 1965. The Logic of Collective Action. Cambridge, MA: Harvard
University Press.
Ostrom, Elinor. 1991. Rational Choice Theory and Institutional Analysis: Toward
Complementarity. American Political Science Review. Vol. 85, no.l ., March, pp.
237-243.
1995. New Horizons in Institutional Analysis, American Political Science
Review 89 (1): 174-179.
Otero, Gerardo. 1998. Mexicos Rural Reform and Contradictions within the Sugarcane
Sector, in Wayne A. Cornelius and David Mhyre, eds., The Transformation of
Rural Mexico: Reforming the Ejido Sector. U S. Mexico Contemporary


150
The Zedillo sexenio will end without reforms to the LFT, although they have been
proposed for years (Cervantes 1999:8).27
In sum, the LFT is a formal historical institution of the state that limits the success
of neoliberal reforms in the labor sector. Productivity bonuses take their cues from the
Congress of Work rather than being set according to real gains in production, and labor
legislation creates a cost-benefit gap that limits formal employment growth. Large
compensation payments for dismissal of workers are still required, representing high
transaction costs to employers. Exclusion clauses in labor contracts prevent non-
unionized workers from receiving contracts. In addition, collective labor agreements limit
worker mobility and the use of seniority promotions slow productivity growth. The LFT
continues to hinder the implementation of neoliberal reforms, and to provide uneven
protections to Mexican workers.
Conclusion
This chapter has shown the ways various institutions of the state influence the
implementation of neoliberal reforms. During the 1980s the implementation of the
reforms went slowly. Corporatist norms, formal and informal pacts, and state institutions
affecting the labor sector had limiting influences on the execution of the reforms. An
informally institutionalized pact of domination maintains a significant role for the state in
the solid alliance between the labor movement and the state, and the struggle,
patriotism and loyalty of the CTM workers, other indications that the informal pact of
domination is still at work in 1999, and affects the outcome of neoliberal reforms (Vargas
and Velasco 1999).
27 The lack of progress is attributed to a combination of 1) indecision on the part of the
government, 2) the frequent rotation of government employees in charge of labor, 3) the


154
demonstrate competitiveness and investment potential while the North American Free
Trade Agreement (NAFTA) negotiations were underway. 3 The reforms of the ejidal
sector are an example of agrarian counter-reforms, which occurred in a number of Latin
American countries during the 1980s and 1990s.^ This chapter begins with a comparative
look at the impact of agrarian counter reforms elsewhere in Latin America before moving
to an examination of the role of the ejido during the reforms in Mexico.
The role of the Confederacin Nacional Campesina (National Peasants
Federation or CNC) is also extremely significant, because 21,454 agrarian groups
(ncleos agrarios" 5)73.57 percent of the total number of agrarian groupsbelong to
the CNC.^ The Procuradura Agraria (PA, known as the Office of the Attorney General
for Agrarian Affairs or Office of the Agrarian General Counsel), is a prime example of the
way that historically institutionalized roles for the state are reincarnated in new state
institutions, even those created specifically to help ease the transition to neoliberalism.
3 NAFTA negotiations began in 1990 although the United States (U.S.) had been
proposing them since the early 1980s (Barry 1995:65).
4 Agrarian reforms occurred first in Mexico and Bolivia and then spread through Latin
America from the 1960s through the 1980s.
5 Ncleos agrarios is a catch-all phrase used by the National Agrarian Registry to refer
to both ejidos and comunidades agrarias (agrarian communities). There are 26,796 ejidos
(comprising 91.89 percent of the ncleos agrarios), and 2,366 agrarian communities
(comprising the other 8 .11 percent of ncleos agrarios){Secretara de la Reforma Agraria
1998:313, citing data from a survey by the Instituto Nacional de Desarrollo Agraria
[INDA] [National Institute for Agrarian Development] conducted in 1996). Agrarian
communities differ from ejidos in that they were indigenous communities that had their
landholdings legally recognized and titled under the 1942 agrarian reform law (Stephen
1994:2). These land holdings have a longer cultural history than ejidos and in general use
land differently than in ejidos.
6 Secretara de la Reforma Agraria (1998:333), citing data from a survey by the Instituto
Nacional de Desarrollo Agraria (INDA) conducted in 1996.


64
reforms, and explain that following the implementation of first generation reforms
(through the late 1990s),
... there is now a general awareness among policymakers that additional
reforms need to be undertaken if LAC economies are to grow more than 6
percent a year.. Policy makers also believe that many of the reforms
vaguely referred to as second generation reforms are different from, and
more problematic than, the first generation reforms. (Burki and Perry
1997:x)
The second generation of reforms moves beyond the neoliberal reform goals of the
Washington Consensus. Reform goals now include a deeper attention to the potential
contributions of institutions to the reform process. As the same authors summarize in
Beyond the Washington Consensus: Institutions Matter (1998):
The Long March concluded, then, that further reforms were needed to
achieve higher sustained rates of growth and to make a more significant
dent in poverty reduction. It identified, in particular, the need to focus on
improving the quality of investments in human development, promoting the
development of sound and efficient financial markets, enhancing the legal
and regulatory environment (in particular, deregulating labor markets and
improving regulations for private investment in infrastructure and social
services), improving the quality of the public sector.. and consolidating the
gains in macroeconomic stability through fiscal strengthening. The report
showed that such reforms would entail considerable institutional reforms.
(Burki and Perry 1998:1-2)
Thus the second generation of reforms involves attention to institutions previously
left out of first generation reforms. Indeed, the Washington Consensus did not anticipate
that the role of institutions would prove to be so significant to the resolution of
development problems. This has been a fundamental flaw in its implications for
development. Neoliberal theories about development have tended to overlook potentially
significant institutional effects. In later chapters (5 and 6), state labor and agrarian
institutions, public sector institutions and other types of institutions mentioned by Burki


31
(The new institutionalists in sociology describe the embeddedness of social action and
situations of bounded rationality. The idea of the embeddedness of social action was
developed by Karl Polyani (1944) and expanded upon by Mark Granovetter (1992 [1985])
and Powell and DiMaggio (1991) (see Koeble 1995:234). Embeddedness refers to the
human tendency to stick to established routines, thereby affecting political, social, cultural
and economic life, making the idea of rationality absurd (Koeble 1995:235). 9 The
embeddedness of social action is an underlying concept in two significant edited volumes
among the new institutionalists in sociology: The Sociology of Economic Life (1992) by
Mark Granovetter and Richard Swedberg, eds., and The New Institutionalism in
Organizational Analysis (1991) by Walter Powell and Paul DiMaggio, eds.
Of special significance to sociological institutionalists are the concepts of bounded
rationality and satisficing developed by organization theorists (Cyert and March 1963;
March and Simon 1958; Simon 1957). Organization theorists challenged the empirical
validity of expectations of rational choice by arguing that members of organizations do not
choose among all possible outcomes, only among certain feasible or simple solutions to
organizational challenges. Rather than making optimal choices, members of organizations
make choices that usually only satisfy their needs. These concepts have proven useful to
many scholars of new institutionalism. Bounded rationality may be defined as the
show how people do not have choices to make still appears to hold true!
(Koeble 1995:232)
9 Koeble explains that,
Individuals are viewed as embedded in so many social, economic, and
political relationships beyond their control and even cognition that it is
almost absurd to speak of utility-maximizing and rational behavior in a
strictly economic sense. The very concept of rationality is dependent upon
its environment. (Koeble 1995:235)


54
1992:356). The diversification of Latin American economies and the creation ofjobs and
income that resulted from the use of ISI has also been lauded (Alexander 1995
[1990]: 165). For example, ISI policies developed textile industries throughout the region
(Alexander (1995 [1990]: 164). Economic indicators for Latin America and the Caribbean
(from 1950 through 1997) are shown in Table One. Table One reveals that both overall
GDP growth rates and per capita GDP growth rates during the decades of ISI compare
favorably with the corresponding growth rates of the decades of neoliberal reforms.
The development of Latin American markets during the period since 1950 may be
compared to the development of United States markets between 1870 and 1910, one of
the most dynamic experiences in worldwide capitalist development (Tokman
Table One: Latin America and the Caribbean: Economic Indicators by Decade
since 1950
(In percentages)
Decade
Leading Economic
Development Model
of the Decade
GDP Growth
Inflation
Foreign Trade
Overall
Per capita
Exports
Imports
Annua
rates of variation
1950-1959
ISI
4.9
2.1
17.8
4.0
3.2
1960-1969
ISI
5.7
2.8
21.6
4.5
4.1
1970-1979
ISI
5.6
3.1
37.9
2.6
7.8
1980-1989
Neoliberal
1.7
-0.4
203.4
5.4
0.0
1990-1997
Neoliberal
3.2
1.4
160.7
9.1
14.2
Source: Economic Survey of Latin America and the Caribbean 1997-1998, United
Nations, Santiago, Chile, 1998, pp. 346, 350, 355, 360, 365.


This dissertation was submitted to the Graduate Faculty of the Department of
Political Science in the College of Liberal Arts and Sciences and to the Graduate School
and was accepted as partial fulfillment of the requirements for the degree of Doctor of
Philosophy.
December 1999
Dean, Graduate School


Ill
signed with the IMF, and in 1996, the economy rebounded with 5.1 percent growth
(Heath 1998:57). The U.S. role in bolstering the Mexican economy during this difficult
period was key to its rapid recovery, a recovery which has obscured from international
attention many urgent development needs which still linger.
Despite a broad variety of neoliberal reforms, the Mexican economy still has major
weaknesses. Among these is a need for tax reforms, an increase in consumer savings,
deregulation and better debt management (Heath 1998:58-59). As a result of strong
corporatist ties, neither the electricity monopoly nor the oil monopoly has been
dismantled. Income inequality rose sharply during the implementation of neoliberal
reforms (Lustig 1998:94). On the whole, the reforms have yet to produce tangible results
for most of Mexican society. 22 The chapters that follow will examine the ways that state
institutions impact the implementation of these neoliberal reforms.
Conclusion
A number of formal and informal institutions have historical significance in
Mexican development. These include both an informal belief in Revolutionary ideals and
the formal institutionalization of many Revolutionary ideals into the Mexican Constitution.
PRI /state fusion causes many citizens to disbelieve that a change in the governing party is
place (essentially a unilateral and indiscriminate import tariff reduction),
especially during the early 1990s. (Gonzlez Gmez 1998:46)
22 Heath (1998:59) explains that,
Still, the thorniest issue concerning all of the reform efforts since the late
1980s is the lack of tangible results. Regardless of whether the goals for
reform have been met or revised, if genuine improvements do not
materialize soon for most of society, the political backlash will set the
country back... .The cost of the reforms have been much higher than
anticipated; those tangible benefits are necessary to make it all worthwhile.


189
the 1990s. This further supports the argument that on the whole, the role of the ejido has
not declined significantly as a result of the reforms, and the institutionalized relationship
with the state continues.
Political manipulations that maintain clientelistic ties between ejidal leaders and
government officials also perpetuate the role of the ejido. For example, in one ejido in
the Ecuandureo Valley the informally institutionalized relations between the PRI/state
and the historically incorporated peasant classes are reborn through PROCEDE (Zendejas
and Mummert 1998). The process served as an opportunity to fortify clientelist links
between ejido leaders and politicians, as well as to renew corporatist links between
peasants and the PRI/ state more generally:
In yet another demonstration of their sagacity in seizing opportunities for
political network building, the ejido leaders. . requested that the official
ceremony in which certificates would be delivered take place in their
village... .The minister of agrarian reform and the state governor presided
over a ceremony...in which ejidatarios...received a total of 8,717
certificates of rights to both ejido common lands and individual arable
ejido plots. . As the ministers and the governors triumphant speeches, the
political clout of their retinue, and the large crowd assembled all made
clear, the officials were doing much more than delivering documents.
They were trying to create nation-state symbols by emphasizing the
governments fulfillment of promises to Michoacns peasants and to the
nations campesinos at large.... As on other occasions, the ejidatarios
were not passive pawns in this ceremony;. .ejido leaders and the
municipal president made use of this ceremony to develop their networks.
(Zendejas and Mummert 1998:195-196)
The delivery of ejidal land titles is conducted in similar ceremonial style throughout
Mexico. Such political manipulation is concealed within what appears to be a
framework of state-ejido negotiation that is fully consistent with the new legal
provisions (Jones and Ward 1998:272).
Since this informally institutionalized set of public-social relations creates
unpredictable outcomes, neoliberal reforms have unpredictable results. The fact that the


258
eds., Dismantling the Mexican State?. London: Macmillan Press and New York:
St. Martins Press.
Weber, Max. 1949. The Methodology of the Social Sciences, (translated and edited by
Edward A. Shils and Henry A. Finch ), 1st ed., New York: Free Press.
. 1958 [1902], The Protestant Ethic and the Spirit of Capitalism. New York:
Scribner.
- 1963 [1920], The Sociology of Religion (translated by Ephraim Fischoff,
introduction by Talcott Parsons). Boston: Beacon Press.
1968 [1922], Economy and Society: an Outline of Interpretive Sociology.
(edited by Guenther Roth and Claus Wittich, translated by Ephraim Fischoff and
others), New York: Bedminster Press.
Weintraub, Sidney, ed. 1994. Integrating the Americas: Shaping Future Trade Policy. New
Brunswick and London: Transaction Publishers.
Weiss, John. 1996. Economic Policy Reform in Mexico: The Liberalism Experiment, in
Rob Aitken, Nikki Craske, Gareth A. Jones and David E. Stansfield, eds.,
Dismantling the Mexican State?. London: Macmillan Press and New York: St.
Martins Press.
Wiarda, Howard. 1973. Toward a Framework for the Study of Political Change in the ^
Iberic-Latin Tradition: The Corporative Model, World Politics. 25: 206-235.
- 1981. Corporatism and National Development in Latin America. Boulder,
Co.: Westview Press.
1995a. Constitutionalism and Political Culture in Mexico: How Deep the
Foundations?, in Daniel P. Franklin and Michael J. Baun, eds., Political Culture
and Constitutionalism. Armonk, N Y. and London, England: M E. Sharpe, pp 119-
137.
1995b. Latin American Politics: A New World of Possibility. Belmont, CA:
Wadsworth.
Williamson, John. 1990. The progress of policy reform in Latin America. Washington,
DC: Institute for International Economics, Series: Policy analyses in international
economics; 28.
Williamson, Oliver E. 1985. The Economic Institutions of Capitalism. New York: The
Free Press.


95
An understanding of corporatism is essential to an observation of Latin America
during periods of modernization (Wiarda 1981). Corporatist institutions have been and
remain influential to Latin American development:
A study of corporatism is crucial if we are to understand the responses to
modernization of the Iberic-Latin nations. Corporatism and the corporatist
tradition are not just ideas and institutional forms of passing interest,
reaching their heyday in the interwar period and then disappearing, but
instead constitute an on-going tradition strongly intertwined with the
history and culture of the area, and continuing today to influence political
behavior and the structure of society and polity in a great variety of
systems, both traditional and modernizing, both left and right. (Wiarda
1981:133)
Much evidence from the 1990s suggests that Wiardas claims remain relevant at the turn
of the 21st century. During the 1970s, as today, it was popular to dismiss corporatism. 11
With the hindsight of the 1980s and 1990s, the claim that corporatism was already almost
irrelevant in the 1970s seems now to have been overstated. As with the longevity of the
PRI, corporatist institutions continue to demonstrate remarkable endurance despite claims
that they are losing relevance.
Other scholars dismiss the relevance of corporatist forms of organization by
arguing that it is merely a type of organization chosen by political elites. For example,
11 Wiarda noted the dismissal of corporatism during the 1970s:
Corporatism, until...[the late 1970s], had been widely dismissed as both
anachronistic and irrelevant. Defeated in World War II and apparently
discredited...., corporatism as an ideology and form of sociopolitical
organization seemed, for a time, to have been erased and forgotten. .a
philosophy and form of national organization whose historical epoch had
been superseded...
Such judgments as regards corporatisms alleged passing and irrelevance
are premature and ill-founded. Corporatist ideology and sociopolitical
structure. .manifest continued strength throughout the Iberic-Latin


15
The impact of the Federal Labor Law on neoliberal reforms affecting the labor sector is
examined. In Chapter 6, an analysis of the role of the ejido is bolstered using primary data
gathered from the Mexican agrarian sector. The role of a variety of other institutions,
including the Mexican Workers Confederation (the Confederacin de Trabajadores de
Mxico or CTM), the National Peasants Confederation (Confederacin Nacional
Campesina or CNC), the National Front of Organizations and Citizens (Frente Nacional
de Organizaciones y Ciudadanos or FNOC), the Mexican Social Security Institute
{Instituto Mexicano de Seguridad Social or IMSS) and the Office of the Attorney General
for Agrarian Affairs or Office of the Agrarian General Counsel {Procuradura Agraria or
PA), is discussed. The National Solidarity Program {Programa Nacional de Solidaridad
or PRONASOL) and the Direct Rural Support Program {Programa de Apoyo Directo al
Campo or PROCAMPO) are also shown to be relevant in this study. A broad variety of
evidence from a number of different formal and informal institutions suggests that the
implementation of neoliberal reforms is being hindered and distorted by institutional
factors.
The final chapter is a discussion of the implications of this research, which extend
beyond simply the Mexican case or even Latin America. This examination and critique of
the practical implementation of development policies is conducted in the hopes of spurring
the refocusing, adjustment or advancement of development ideas and ideals. What does
the revelation of institutional effects imply for development in general? Institutions can
best aid development (or at least not hinder it) if their existence is acknowledged and
taken into account by policymakers. This study reveals the difficultyindeed, at times,
the apparent impossibilityof undoing certain institutions. It is unrealistic to expect such


163
The significance of the role of the ejido in modern Mexican history should not be
underestimated. Ejidos embody the special relationship between campesinos and the state
and have made up a large percentage of Mexicos arable land. Data on exactly what
percentage of the total land area is ejidal, as well as the total number of ejidos in existence,
varies somewhat. Gareth Jones maintains that 29,951 ejidos representing over 55 per
cent of the Mexican land area have been created (Jones 1996:188). Thiesenhusen refers
to around 28,000 ejidos, and other data (shown in Table Three) indicates that only around
40% of the total Mexican land area was ejidal (see Randall, 1996b:6; Thiesenhusen
1996:35).
Table Three: Land Use and Tenure by General Type, 1988
General Type
Percentage
Area (millions of
hectares)
Livestock grazing
57.6
112.8
Private property
(32.6)
(63.8)
Ejidos
(25.0)
(49.0)
Agriculture
12.6
24.7
Private
(3.2)
(6.3)
Ejidos
(9.4)
(18.4)
Forestry
12.3
24.1
Private
(4.7)
(9.2)
Ejidos
(7.6)
(14.9)
Federal government land
6.2
12.1
Urban real estate
2.2
4.3
Other uses
9.4
18.4
Total area
100.3
196.4
Source: Randall 1996b:6


131
The pact of domination continues to be relevant at the end of the 20th century,
despite neoliberal reforms. The informal pact between the state and the incorporated mass
organizations is embodied in the rhetoric of social liberalism. The Mexican state responds
overtly to the needs of constituents with attempts to improve the general perception of the
states responsiveness to societal needs and to sustain the pact of domination. For
example, the PRI/state may be challenged by independent workers unions, and choose to
include some of them in aspects of governance. Yet at the same time, they may exclude
more radical groups. 1 This process over time fortifies the belief that working with the
state is one way to achieve group goals. It also bolsters the position of the state as a
significant force in state-societal relations.
Adaptability characterizes many institutionalized relations in Mexico, and is one
reason for the incredible longevity of the PRI regime (see e.g., Collier 1992, Zapata 1996).
Informal pacts among social actors and the state cause the state to hang on to elements of
social welfarism, in contradiction of the goals of neoliberal reforms (Brachet-Marquez
1994; de la Garza 1994). The informal pact of domination is also manifested in formal
state institutions.
The Pact for Economic Solidarity and other Formal Pacts
Formal pacts are the embodiments of these informal institutions, revealing the
reincarnation of historical pacts in tangible modern institutions. Recent intersectoral pacts
tie together some of the same sectors that have frequently been features of the Mexican
H See, e.g., Government Denies Independent... (July 1999:11).


192
producers in the region have not responded as hoped. Producers in Puebla do not operate
according to the principle of comparative advantage:
.. growers in the region are opting either to stay with sugarcane, the most
secure crop and the only one for which they are guaranteed a loan, or to
withdraw from the market altogether to grow subsistence com and beans.
(Otero 1998:96)
Where do these guaranteed loans for sugarcane production come from? The CNC
and FNOC guarantee their availability. Cane growers were compulsorily affiliated to one
of these two official organizations of the PR1 after 1983, and as of the summer of 1995,
this was a significant reason for their continued production of sugarcane (Otero 1998). In
a survey of 222 growers in the Atencingo region of Puebla, 27.5 percent said they
cultivate sugar because of their access to credit (Otero 1998:98).
Another reason to continue producing sugar, according to the growers, is the fact
that sugar is the only crop that gives producers access to health insurance through the
IMSS (Otero 1998:97). The IMSS thus influences the success of private industrial
groups such as Grupo Escorpin, which operates in Puebla:
Grupo Escorpin, in line with the thrust of neoliberal policies, is trying to
reconcentrate the land so as to deal with fewer producers and to have a
more efficiently planned and operated agricultural process. Grupo
Escorpin has met with absolute refusal on the part of ejidatarios to let go
of their hard-won control of the land. If anything, they are distributing it
further, passing it to their children in order to assure them a subsistence
and access to the health services and other benefits of Mexicos Social
Security Institute (the IMSS). (Otero 1998:95)
Hence the IMSS interferes with the neoliberal reforms even years after their
implementation. A discrepancy exists between the rhetoric of reform and the practice of
continued assistance. Despite the fact that the IMSS has changed its rules so that it will
grant membership only to cane growers with at least three hectares, there have been no


24
1969:6). The new institutional economists attempt to merge theoretical insights from
neoclassical economics with the influence of institutions, to create a more relevant social
I science. Both the old and the new institutionalists within economics criticized neoclassical
economics for several reasons:
. .the two schools share a strong criticism of neoclassical economics for (a)
its lack of attention to institutions and hence to the relevance and
importance of nonbudgetary constraints, (b) its overemphasis on the
rationality of decision making, (c) its excessive concentration on
equilibrium and statics as opposed to disequilibrium and dynamics, and (d)
its denial that preferences can change or that behavior is repetitive or
habitual. (Nabli and Nugent 1989:1336)
Institutional economists explore a wide range of institutional effects. They might,
for example, detail the inefficiency of state-run organizations, and point out that such
institutions often limit development. For orthodox institutionalists,
the framework of analysis involves an examination of the tensions between
the dynamic force that promotes economic growth and development-
technological progressand the retarding, past-binding institutions,
socioeconomic structures, and their associated behavior and thinking
patternscalled ceremonialismthat tend to slow technological adaptation
and impede economic development. (Dietz 1995a: 16)
From the perspective of orthodox institutional economics, the inefficiency of many state-
run organizations is widely assumed, and the perseverance of such state institutions
despite reform attempts is therefore seen as a hindrance to development.
There are two general approaches within the new institutional economics: (1)
transaction and information costs, and (2) collective action (Nabli and Nugent 1989:1336-
1337). The transaction cost school grew out of work by Coase (1960) and was followed
by such authors as Williamson (1985) and North (1990). Its adherents argue that
economic performance depends upon the right institutions to lower the costs of
information, coordination and enforcement of contracts (Bardhan 1989:1389).


57
state economic resources via fiscal and monetary policies (e g., taxation); administrative
autonomy; public enterprises; regulatory agencies; state capacity to maintain and repair
basic infrastructure (such as transportation, communication and energy networks); human
infrastructure; state bureaucracy; the ability to reshape society (e g., via agrarian reform);
a system of corporatist organizations to encourage societal participation (Mauceri cites
SINAMOS, a Peruvian state agency designed to support social movements); the ability of
a state to repress challenges to its power; and the ability of a state to maintain a strong
position internationally (e g., to avoid having international lending agencies dictate
domestic policies) (Mauceri 1995:11-15). Although these indicators are not quantified,
this list provides a way of thinking about the institutionalization of the political capacity of
the Latin American state.
To complete the definition of institutionalized political capacity, informal
institutions must also explicitly be encompassed, since informally institutionalized
interactions are common in Latin America. Institutionalized political capacity thus refers
to the consolidation of control through both formal and informal means. The definition of
institutionalization provided by Stepan (1978) is relevant here, as discussed in Chapter 2.
A regime has institutionalized political capacity if its goals are supported by formal
institutions such as laws, regulations and contracts, as well as informal institutions such as
trust, ethics / values and political norms (Burki and Perry 1998:12). The strengths of both
formal and informal institutional political capacity in many Latin American countries make
them important factors to consider in any study of development policies in the region.
During the ISI period, Latin American institutionalized political capacity
strengthened considerably. The state nationalized key industries, gaining control over vast


144
... [T]he UNT has yet to establish a national headquarters, has not yet won
inclusion in the governments tripartite boards, and has not succeeded in
getting the congress to establish either the new salary board or the national
registry of unions and contracts that it has advocated. (National Union of
Workers... 1998:5)
Despite the independent formation of the UNT, it too may be susceptible to cooptation,
providing further evidence of the continuities in the informal state-labor alliance. 21
Francisco Hernandez Juarez is one of three co-presidents of the UNT. Hernandez is also a
member of the PRI and was a friend of former President Salinas (Bierma 1998:5).
Growing links between the UNT and the PRI appear to be instrumental in reducing the
momentum of the UNT labor movement. In the first year of operation, several alliances
with the CTM began to spring up:
At times the UNT seems to move toward the right, back toward the
government-controlled Congress of Labor (CT) and Confederation of
Mexican Workers (CTM). For example, it joined with the PRI-
government federations in creating a so-called Workers Bloc to negotiate
changes in the Federal Labor Law (LFT) with the government and the
employers. More recently in the state of San Luis Potosi there have been
efforts to form a Union Bloc of the CTM, the CROM.. and the UNT.
These bureaucratic alliances so far do little to advance worker self
organization. (National Union of Workers... 1998:5)
The birth of the UNT exemplifies the capacity of labor to reorganize to fight
against the loss of worker protections, whereas the move to coopt the UNT represents the
attempt by the state to retain corporatist control over the labor sector. During 1999, the
UNT has maintained its more radical stance. The state, in response, has continued to
21 The possibility of the UNT being coopted has led Mexico City economist Jonathan
Heath to argue,
I think its possible that the UNT could replace the CTM, but Im not sure
it would be a truly independent union...It could end up being very symbolic
of the way things happen in Mexico. That is, the UNT might appear to be


246
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206
President Zedillo denies that PROCAMPO is a program designed for political benefit.50
Yet such links were observed in many states:
PROCAMPO was among the programs most strongly criticized for linking
access to agricultural supports with a vote for the PRI. Alianza Cvica
found such a link in Guerrero, Oaxaca, Hidalgo, Durango, Michoacn,
Veracruz, Chihuahua, and San Luis Potos. (Appendini 1998:33, fn. 6)
What about PROCAMPOs current status? Not insignificantly in this pre-election
year of Hidalgo,5^ the funding for PROCAMPO is now at least supposed to keep up
with the pace of inflation, after losing value due to inflation for several years. The other
main agricultural support program, Alianza para el Campo (Alliance for the Countryside)
will also gain significant funding this year, increasing by as much as 100 percent in some
states (Zedillo, January 28, 1999).
In similar fashion to the distribution of PROCEDE land titles, PROCAMPO
payments are also dispersed during ceremonies at which PRI functionaries give speeches.
PRD (Partido de la Revolucin Democrtica, Party of the Democratic Revolution) party
senator Jorge Caldern (also a professor of Agricultural Economics at the UNAM
[Universidad Nacional Autonoma de Mxico or National Autonomous University of
Mexico]) considers PROCAMPO an instrument to induce voting, and argues that,
...there is a symbiosis between functionaries of Procampo, municipal presidents,
campesino leaders and federal and state authorities 52
50 See, e g., Communicado No. 735 Mrida, Yucatan, February 26, 1998, (Niega el
presidente Zedillo que Procampo sea un programa partidista o electorero, President
Zedillo denies that Procampo is a party- or electoral-program).
51 See Chapter 4.
52 Quote by Caldern cited in Enciso, August 11, 1997.


107
High turnover rates, the lack of job security, and the absence of a solid
pension or retirement fund often lead public officials to prepare individual
retirement schemes; even for those who continue in government, the
unlikelihood of remaining at their current post erodes their accountability
to the constituents of the agency. Increased public spending and a
weakening of the anticorruption campaign during the latter years of the
term further contribute to the opportunities for corruption. The result is
widespread corruption during the final year of the sexenio ... [T]he year is
popularly dubbed the year of Hidalgo (referring to Miguel Hidalgos
likeness on Mexican currency): este es el ao de Hidalgo, chin-chin el que
deje algo (this is the year of Hidalgo, he is a fool [polite form] who
leaves something). (Morris 1991:84-85)
Morris argues that the year of Hidalgo and the anticorruption campaign represent two
sides of the same coin (Morris 1991:86); as the sexenio wears on, the campaign against
corruption wanes and corruption itself grows. Thus the PRI uses different phases of the
sexenio to achieve various electoral and governing objectives. These two phases, the
anticorruption campaign and the year of Hidalgo, are informally institutionalized patterns
of behavior in the ongoing chronology of Mexican political interactions.
Neoliberal Policies and Trade Agreements
To understand the impact of these and other institutions on the implementation of
neoliberal reforms in Mexico, a brief general introduction to the reforms in Mexico is
useful. *9 The first economic stabilization package, the Program of Immediate Economic
Reorganization {Programa Inmediato de Reordenacin Econmico, or PIRE) was
announced in December 1982, under the government of President Miguel de la Madrid
Hurtado. It consisted of a shock treatment in 1983 succeeded by gradualist policies
I9 For a thorough description of Mexicos economic reforms, see Lustig (1998). See also
Cook, Middlebrook and Horcasitas, eds. (1994), Gonzlez Gmez (1998), Heath (1998)
or Ramirez (1997).


135
In contrast to the changes in most authoritarian regimes in the region,
...conflict in Mexican-state-business relations stopped short of rupture and
business elites political activation failed to facilitate a full-fledged
transition to democracy.. .[B]usiness elites have thus far only succeeded in
ushering in a process of partial and segmented political liberalization which
has tended to reinforce, rather than erode, the basic pillars of authoritarian
rule. (Heredia 1992:1)
This is caused largely by the continuing significance of institutionalized corporatist control
over labor, peasant and popular sectors (Heredia 1992:1). As a result, the Mexican
regime did not undergo the same moves away from authoritarianism that many other Latin
American states did during the 1980s, and its economic policies have been affected by this
institutional heritage.
The series of annual national economic and political pacts used in the late 1980s
and 1990s represent formal institutionalizations of old corporatist ties. Although the
intersectoral pacts themselves were created in the 1980s and 1990s, traditional informal
corporatist institutions lie in the foundations of each. Despite the fact that the pacts were
adopted to advance neoliberal economic interests, politically they represented the
continuation of less democratic corporatist institutional forms. Ultimately, the direction of
political and economic change during this decade of neoliberal reforms was significantly
influenced by the informal institutions around which the formal intersectoral pacts were
designed. These pacts are evidence that economic development in Mexico during the
period of neoliberal reforms in Mexico differs in important ways from the neoliberal
ideal.


104
clientelist ties. Another institution that characterizes the Mexican political system is the
sexenio.
The Sexenio
The Mexican political system is heavily influenced by the cycle of presidential
elections. Since 1917 there has been no presidential reelection. Instead, the office may
only be held for a single, six-year term, the sexenio. Article 83 of the Constitution
mandates that the Presidential term of office begins on December 1st and stipulates that
under no circumstances can a person be President during two separate sexenios (Article
83, Mexican Constitution^).
There are both benefits and disadvantages inherent in a six-year term. For
example, the term is long enough to accomplish slightly more long term goals, yet if the
elected candidate governs poorly, he / she has time to do more damage than if the term
were shorter. The ruling PRI has learned to use the sexenio to its advantage by pursuing
different strategies at different stages of the presidential cycle.
To perpetuate the reelection of PRI candidates, the PRI has characteristically
concealed national economic problems that surface near the end of a sexenio. This serves
to bolster the impression of adequate leadership by the ruling party. At around the same
time, usually the fourth year of a sexenio, the membership of the presidents cabinet (from
which the incumbent will be selected) is finalized (McCormick 1995:252). The president
and cabinet members each have vertical networks of camarillas or cliques of politicians
18 Constitucin Poltica de los Estados Unidos Mexicanos, Trigsima Quinta Edicin,
1967, Editorial Porrua, S. A., Mxico, D. F. Originally published by the Pan American
Union, General Secretariat, Organization of American States, Washington, D C., 1968.


108
during 1984-85 (Lustig 1998:29). Shock treatment began with a large devaluation of
exchange rates, and a planned cut in public spending; gradualist policies meant that no
new drastic fiscal and exchange rate measures would be implemented (Lustig 1998:30-
31,34).
Yet this stabilization program failed, and during the 1983-1985 period, actual
inflation was 25-45 percent higher than the original International Monetary Fund (IMF)
predictions (Lustig 1998:35). Between 1983 and 1987, foreign debt had to be
rescheduled three times (Heath 1998:42). These initial orthodox stabilization methods
failed in part because Mexico was experiencing inertial inflation, a cycle of inflation
followed by high salary increases that cause further inflation (Heath 1998:44). Structural
reforms were limited. Privatization of public firms began, but meaningful changes
proceeded very slowly.
Trade reform began in 1985 and Mexico joined the General Agreement on Tariffs
and Trade (GATT) in 1986. Trade liberalization was accelerated in the mid-1980s, and
tariffs were reduced from an average of 27 percent in 1982 to an average of 13.1 percent
in 1987 (Heath 1998:45). In October 1987, stock markets crashed internationally, and in
response, Mexico initiated a new stabilization program that would combine elements of
heterodox and orthodox approaches, along with an Economic Solidarity Pact (discussed in
Chapter 5) (Heath 1998:44).
In December 1988, President Salinas de Gortari took office and pushed even more
strongly for economic liberalization. Economic reforms took precedence over political
reforms during this sexenio (Valds Ugalde 1994:231). Mexicos foreign debt was
rescheduled for a fourth time since the crisis began, and this time outstanding external debt


224
particular set of objectives.3 Pure neoliberal policies may not be best for all countries or
regions, or during particular historical periods, and there is no single universal definition of
development. Neoliberals tend to define development in terms of economic growth more
frequently than other analysts, who may emphasize equity, for example. Yet countries
may find greater success with policies that vary from neoliberal ideals, or they may
interpret the success of their development policies in ways other than neoliberal ones.
Development strategies that contain elements that contradict neoliberal policies
may result in better outcomes than expected. When considered in this light, institutions
working in contradiction to neoliberal goals may not be burdensome. Even corrupt
corporatist institutions have sometimes been considered beneficial for the role they play in
maintaining political stability (Knight 1996:231). Such a view is somewhat farfetched, but
it reveals the variety of ways one may think about development.
Since the timing of neoliberal reforms has run years behind the rhetoric of reform,
development outcomes have been significantly affected. In practice, development
outcomes have entailed not only the lags and disjointedness anticipated and accepted by
neoliberals in theory, but other additional delays that were unforeseen by neoliberal
development planners. The combined effects of the lags and the delays have become a
tremendous burden on the poor in Latin America. At the turn of the 21st century, the
original sacrifices built into neoliberal development plans need to be reassessed. They
placed far too much initial strain on the poor. The additional development delays that
result as reforms are implemented also need to be critically scrutinized. Even if the
3 See Teitel (1992:2) for a summary of Hirschmans thought on these issues.


168
differences that make generalization difficult. Nonetheless, the radical changes expected
by some analysts have, for the most part, not been achieved.
The Current Status of the Reforms: The Implementation of PROCEDE and
Private Sector-Ejido Joint Ventures
The results of the research conducted during 1992-1996 by the participants in the
Ejido Reform Research Project are somewhat surprising to many analysts:
... [F]ew of the initial expectations concerning reform of the ejido sector
have been realized. Proponents of the 1992 reform measures argued that
enhanced land tenure security would lead rapidly to new private investment
and technological modernization in the ejido sector, thus raising
agricultural productivity. For the most part, this has not yet occurred.
Indeed, few of the joint production and marketing ventures that
government planners predicted private firms would establish with ejidos
have actually materialized.. Land titling has proceeded slowly in most
areas, and ejidatarios whose land rights have been certified show continued
reluctance to sell their land, perceiving it as a source of financial security.
These conclusions point toward a more gradual and regionally varied
though still far-reachingprocess of rural transformation than most
observers anticipated just a few years ago. (Cornelius and Myhre 1998:18-
19)
Does recent evidence continue to support these conclusions? A review of current
official data of the status of the reforms, the work of scholars who participated in the
Ejido Reform Research Project, as well as the work of other scholars working on similar
issues, will shed light on this issue. This examination will highlight the variety of ways
through which ejidos impact the implementation of neoliberal reforms.
The attempt to certify ejido lands is a process involving a series of steps. The
government program designed to distribute land certificates is called PROCEDE
13 See Procedimiento General Operativo, Mexico, Sector Agrario (available via the
Internet at http://www.sra.gob.mx/FSRA213.html for a complete description of the
processes involved in each step. The steps include: 1. Establishment of coverage; 2.
Document validation and incorporation into the program; 3. Coordination and


105
ranging in size from 30 to 150 members (McCormick 1995:251). Camarillas are bound
together by personal loyalty to their leader rather than by ideology (Cornelius 1996:41).
This is another example of patron-client ties in action. This personalistic system serves to
perpetuate the rule of the PR1 by creating opportunities for career politicians to advance
based on their contacts with other PRI politicians. The camarilla is used strategically
throughout the sexenio. At the end of each sexenio, members of the presidents camarilla
are expected to support the image of the PRI and obscure inadequacies of government.
By the time the new candidate is elected, reforms are overdue; in fact, they are
usually long overdue. At this point, the incumbent distances himself from the mistakes of
his predecessor. He reorganizes the government, gives members of his camarilla powerful
positions in the new government and changes official policies. During the early years of
each sexenio, an anticorruption campaign takes place that serves many functions:
... [I]t helps the incoming administration disassociate itself from the
previous administration; it diverts attention from certain new issues and
problems; it attempts to boost the legitimacy of the new government
among the popular sectors; it allows a means of purging political enemies;
and it foments a centralized, presidential control over a virtually new crop
of bureaucratic officials. (Morris 1991:85)
To distinguish the ebb and flow of the anticorruption campaign during the sexenio,
Morris uses data on the number of corruption-related news stories between 1970 and
1984 (Morris 1991:83-101). He reveals three key aspects of the anticorruption campaign:
First, the anticorruption campaign includes three essential components:
rhetoric and mobilization, the prosecution of public officials, and structural
and legal reforms. Second, anticorruption campaigns carry certain inherent
dangers, such as how to deal with former presidents, that often detract
from their credibility. Third, despite the serious tone they project and the
optimism they inspire, anticorruption campaigns have proved largely
unsuccessful in more than temporarily curbing the incidence of corruption.
(Morris 1991:91)


123
commitments to labor and peasant sectors), while the more hidden agenda involved the
implementation of neoliberal structural adjustment policies that would take a harsh toll on
large segments of the population. In relations with the international financial community,
on the other hand, a different dynamic was at work. Mexican politicians (especially the
tcnicos) sought to demonstrate a deep adherence to neoliberal dictates, while in reality,
the regime still had many state-owned enterprises and relied heavily on the support of
corporatist mass organizations. The institutional limits on the implementation of
neoliberal reforms made it impossible for the regime to publicly present an accurate
portrayal of the misshapen process, either domestically or to the international financial
community. Ultimately, this caused economic and political problems both domestically
and internationally. Domestically, constituents have grown increasingly dissatisfied with
the toll the reforms continue to take, as income inequality grows and poverty remains
high. ^ The Zapatista uprising is a manifestation of this discontent. Internationally, the
peso crisis in December 1994 set off a precipitous drop in investor confidence.
The second type of institution perpetuated nationally with the articulation of social
liberalism is the reliance on mass organizations such as the CTM. Salinas attempted to
shift the benefits of social welfarism from the incorporated collective social groups to a
more liberalized commitment to popular rights (Middlebrook 1995:304). Yet although the
incorporated collective groups have been downgraded in significance, they have hardly
disappeared from the scene. Instead, informal pacts with these incorporated groups
5 The number of poor grew from 36 to 43 percent of the population since Zedillo took
office, a 20 percent increase during his sexenio (National Union of Workers... September
16, 1999).


190
outcomes of the reforms have been so unpredictable to date suggests that their ultimate
effects will be quite varied.45 These irregular and unanticipated outcomes are the result
of the influence of the ejido during the era of neoliberal reforms. The ejido building
constructed in Zamora, Michoacn in 1994-95 is representative of the status of ejidos
today, embodying,
...multiple, potentially overlapping and competing versions of the
significance of ejido rights and membership. Rather than representing a
shift toward full market orientation, the refurbished ejido stands for an
evolving relationship with the federal, state, and municipal governments.
(Goldring 1998:170)
What does this mean for the implementation of neoliberal reforms in Mexico? An
understanding of the strength of the ejido as an institution is key to comprehending the
long-term consequences of the neoliberal reforms to the agrarian sector. Despite the
neoliberal reforms implemented nationally, outcomes will differ from those anticipated
by policy makers and many scholarly observers, because of its continued influence.
Ejidos will persevere, fewer land sales than anticipated will occur and the ejido will
evolve into an institution suited to the 21st century rather than being rapidly replaced by a
minority of large-scale agriculturalists.
45 Jones and Ward explain that:
.. the reform has not produced many changes to land market operations
other than when the state is involved. In the short term we will probably
observe a transition to a hybrid land market that incorporates many of the
old practices, agents, and irregularities, alongside some new forms of state
intervention, private-sector participation, and ejido-controlled methods of
land alienation. (Jones and Ward 1998:272)


188
and the state. The Agrarian Law of 1992 has shown that, the Ejidal or Communal
Assembly is the supreme organ in the life of the agrarian groups, and has a set of
responsibilities, obligations and powers {Secretara de Reforma Agraria 1998:104). The
Secretara de Reforma Agraria reports that PROCEDE has,
... converted the ejidal assemblies into authentic forums of discussion of
other programs and projects related to local development, an experience
which is noted even in those ejidos which have rejected their incorporation
into PROCEDE. {Secretara de Reforma Agraria 1998:105)
Thus new life has been breathed into the ejidal assembly as a result of PROCEDE.
The state is reinventing the responsibilities of the ejido to its members.
Regularizing ejidal and communal properties forms the basis for new ways exploiting
resources {Secretara de Reforma Agraria 1998:129). Ejidos must now attend to six
broad responsibilities with the support, assistance and at times instruction from the
institutions of the Agrarian Sector {Secretara de Reforma Agraria 1998:130). These
include:
(1) elaboration or updating and reform of the internal ejidal and communal rules,
(2) creation and systematic updating of a registry book of the agrarian group,
(3) creation and continuous updating of an accounting and administrative book of the
group,
(4) designation of and depositing of a list of heirs of ejidatarios and communal residents
(5) gathering of residents for meetings, and,
(6) periodic renovation of the representative and vigilant bodies {Secretara de Reforma
Agraria 1998:130).
The rhetoric of the Secretara de Reforma Agraria with regard to the responsibilities of
the ejido does not match well with the neoliberal rhetoric touted at the national level in


244
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66
early neoliberal reforms were numerous, and groups 22 Latin American countries as early
reformers, second-wave reformers, third-wave reformers, and nonreformers (Edwards
1995:8). Within each wave, reformers move through phases of initiation,
implementation and consolidation (as described by Haggard and Kaufman 1992) (Edwards
1995:9). By denominating countries as reformers, he implies that elements of change
are the defining characteristics of the development arena in these countries (Edwards
1995).
Edwards summarizes the status of neoliberal reforms in Latin America in a way
that exemplifies the literature highlighting elements of change. He reiterates the attitudes
of many analysts, noting that,
The Latin American reforms of the 1980s and early 1990s are impressive.
Most countries opened up their economies to international competition,
implemented major stabilization programs, and privatized a large number of
state-owned firms. Toward mid-1993, analysts and the international media
were hailing the market-oriented reforms as a success and proclaiming that
some Latin American countries were on the way to becoming a new
generation oftigers. (Edwards 1995:6)
Perhaps one of the most emphatic claims about reforms bulldozing preexisting
institutions is found in a recent examination of Bolivia (Toranzo Roca 1996). In this
chapter, Toranzo Roca argues that neoliberal reforms not only changed economic policies
but also transformed political thinking and historical beliefs:
The New Economic Politics approved of in August 1985 was also the
beginning of a new strict programme of structural adjustment, and it also
Privatization Amidst Poverty (19941: Carlos F. Toranzo Roca (1996) Bolivia: Crisis,
Structural Adjustment and Democracy, in Alex E. Fernndez Jilberto and Andr
Mommen, eds., Liberalization in the Developing World: Institutional and Economic
Changes in Latin America. Africa and Asia. London and New York: Routledge.
* 5 Nonreformers include the Dominican Republic, Ecuador and Haiti (Edwards
1995:7).


110
should have been devalued earlier, and others critiqued the way the devaluation itself was
carried out. The Salinas administration apparently decided to postpone the devaluation
because of a desire for smooth national elections in 1994, and a fear of disrupting the
banking system (Lustig 1998:163). The international impact this crisis had on economic
flows is sometimes called the tequila effect.
The crisis was essentially the result of three factors: an expansive monetary policy,
the current account deficit and unilateral trade liberalization (Gonzlez Gmez
1998:46).21 The Mexican government had issued nearly $30 billion worth of short-term,
dollar denominated treasury notes (Tesobonos) that were to come due in 1995
(Handelman 1997:138). This represented 62 percent of total federal government debt in
1994 (Gonzlez Gmez 1998:49). In addition, a balance-of-payments problem was
renewed as a result of trade liberalization. The low domestic savings rate had made
Mexico extremely dependent on foreign funds. These problems were also compounded by
domestic political issuessuch as the Zapatista uprisingthat made foreign investors
nervous (Handelman 1997:138-139).
The Mexican economy recovered rather quickly from the peso crisis, due largely to
rapid moves by the U.S. to protect the economy (Lustig 1998:172-200). Just over 50
billion dollars became available as an international rescue package, about half of which
was actually used (Gonzlez Gmez 1998:50). A structural adjustment package was also
More precisely, Gonzlez Gmez explains that these three factors are:
the way monetary policy (liquidity, interest rate, and exchange rate policy)
was implemented during 1994; the size of the current account deficit
(which reflected a huge gap between imports and exports), as well as the
means used to finance it; and the way in which trade liberalization took


CHAPTER 7
CONCLUSIONS: DEVELOPMENTAL IMPLICATIONS
OF INSTITUTIONAL EFFECTS
As explained in the introduction, the aim of this study was to contribute to our
understanding of development issues in Latin America and beyond. This study has shown
that a significant number of formal and informal state institutions continue to function in
many ways that are paradoxical to the aims of neoliberal policies. Institutional factors
usually hinder neoliberal development policies, although occasionally they do advance
certain aspects of them. The number of formal state institutions is reduced and finances
are cut, but the informal institutions have been more resistant to change. As a result, even
at the turn of the 21st century, many Latin American state institutions continue to function
in ways which contradict overarching national neoliberal policies. Thus, the economic
development model being shaped in Latin America at the end of the 20th century cannot be
characterized unambiguously as neoliberal. Instead, the pattern manifested is
neoliberalism filtered through the influential mesh of historical institutions of the populist
state.
These findings call into question the validity of neoliberal development theory.
Neoliberalism underestimates both the significance and the persistence of institutions, a
shortcoming that produces very undesirable effects on development when neoliberal
theories are implemented. This study proposed the adoption of a historical institutional
approach to development issues, and the approach has been used to demonstrate how
210


158
With the promise of land titles, this uncertainty is reduced, and some sales of CAS lands
thus may be avoided.8
In sum, although the institutional foundations of the CAS were only about a
decade old, these collective state institutions did limit the impact of neoliberal reforms
during the 1990s. Collective forms of land use played a role in maintaining the integrity of
the sector that benefited from the SAR, and parceling and privatizing land ownership was
not much of a priority for many of the peasant beneficiaries. The record from the early-
and mid-1990s suggests that the state institutions put in place by the FSLN influenced the
progress of neoliberal reforms in the Nicaraguan countryside. At the turn of the 21st
century, with the provision of land titles to agrarian reform recipients, it is uncertain
whether the institutional heritage of the CAS will strongly differentiate development of
these lands from that of similar lands that were not in the reform sector. The record from
the short-term, at least, suggests that it will.
Chile: From Asentamientos to Parcelas
In Chile, almost 10 million hectares were expropriated during ambitious agrarian
reforms initiated in 1967 and accelerated during 1970-1973 (Larran B. 1994:113). These
reforms created asentamientos, a type of cooperative production system (Silva 1991:15).
The agrarian reforms integrated campesinos into the national political system and
stimulated,
8 In 1997, 3,900 land titles were distributed and an additional 6,000 were to be distributed
in 1998 (Lopez G. 1998). As of 1988, a total of 47,065 families occupied CAS lands
(Enriquez 1997:112). Although previous owners are still fighting to recover their lands,
the Nicaraguan Supreme Court has suspended the return of properties confiscated during
the Sandinista government (Ibarra 1998).


197
communal rights... (1998:93). The PAs involvement in the land titling process is
inherently problematic:
In practice,. ..since the Procuradura field staff actively participate in
coordinating, setting up, and implementing the program, any complaints
related to the titling program are made to the same government bureau
whence the agents allegedly committing the abuse come. Thus the
Procuradura becomes both judge and jury in PROCEDE. (Baitenmann
1998:121, citing Baitenmann 1994b)
This reveals that neoliberal reforms transferred state support to other government
institutions rather than eliminating it entirely.
The reality of state involvement in the countryside contradicts the rhetoric of
neoliberal reforms. The state, rather than withdrawing from productive activity in the
countryside, is actually gaining a presence there (Bartra 1996:173). Although the
economic presence of the state is constantly decreasing, the states presence has become
more direct and paternalistic (Bartra 1996:174).
Mexico at the turn of the 21st century does not appear as reformed as the
neoliberal planners had hoped it would by now (Baitenmann 1998; Bartra 1996; Fox
1996; Jones and Ward 1998; Otero 1998). Older state roles have been reincarnated
within the confines of new state institutions created for the implementation of neoliberal
reforms (Bartra 1996). This continuity is deleterious to the Mexican countryside and to
campesinos. 49
votes. This was possible precisely because there was no ballot secrecy.
(Baitenmann 1998:120)
49 The corruption characteristic of historical relations between campesinos and the state
is still evident today, as Bartra depicts with chagrin:
The peasant world continues to be dominated by an omnipresent dealer
state that clings to both the old, cutthroat caciques and the brand-new
conciliating leadership, with its faxes and computers. Rural life still
dangles from the strings pulled by the institutional patriarch, existing in


164
In any case, the amount of land held ejidally was and is quite significant, and its
political role has been no less important. The ejido was conceived as a compromise to
serve simultaneously as an instrument of political control, a means for the organization of
production, and a body of peasant representation (de Janvry, Gordillo and Sadoulet
1997:1). The connections between ejidos and the PRI^ V state grew over many decades,
especially through the affiliation of millions of ejidatarios to the CNC. In exchange for
relative political passivity, ejidatarios historically had some influence over the PRI/ state
when compared with non-incorporated groups. The state had deep connections with the
ejido:
The state established a mechanism to control the rural sector by weaving
together the affairs of the ejidos executive committees (comisariados
ej¡dales) with various state institutions: intermediary institutions such as
the Regional Peasant Committees, the State League of Agrarian
Communities, and the National Executive Committee of the National
Peasants Confederation (CNC). It is through this hierarchical network of
institutions that the ejido came to play the role of an organization for
political control, (de Janvry, Gordillo and Sadoulet 1997:1)
Thus the ejido has historically been a very important institution of the Mexican PRI/state,
and its role in the political economy of Mexico was far from the ideals of neoliberalism.
As such, an examination of its impact on the implementation of neoliberal reforms is quite
relevant to this study.
Reasons for the Proposed Dismantling of the Ejido
A number of national and international influences resulted in the 1991 decision to
disband the ejido. It had never blossomed into the solution for peasant well-being
11 Partido Revolucionario Institucional or Institutional Revolutionary Party.


148
which the worker derives from this legislation (Dvila 1997:293).23 The cost-benefit
gap influences economic development in Mexico:
This cost-benefit gap can constitute an important obstacle to formal sector
employment growth and to the adequate functioning of social security
institutions (for example, by giving incentives to underdeclaration of
income and adverse selection in affiliation). The economic analysis of this
phenomenon takes on great importance in the case of Mexico, because of
the magnitude of the distortions brought about by the laws currently on the
books, and because one of the principal goals of the... social security
reform...was to reduce this cost-benefit gap. (Dvila 1997:293-294)
Thus despite many neoliberal reforms, labor legislation hinders the success of
economic development in the era of neoliberal reforms. One way that the LFT hinders
economic efficiency is through its establishment of the payment of large indemnizations
both in cases of unjustified dismissal of a worker and in cases in which a worker is given a
just motive for resigning (Dvila 1997:308). In practice, these payments of
compensation represent overly high transaction costs such as legal insecurity and drawn
out settlements (Dvila 1997:308).24 These effects are harmful to the labor sector.
Businesses are turning ever more to subcontractors to satisfy their need for labor (de la
Cruz 1995). Greater insecurity for economic agents is a result of the continued influence
of this legislation (Dvila 1997).
The LFT hinders economic development in other ways as well Labor contracts,
promotions based on seniority and certain other types of promotions also interfere sharply
with economic development (de la Cruz 1995:16). For example, some labor contracts
23 The same argument is attributed to Mexico City economist Jonathan Heath (see
Bierma 1998:8).
24 Dvila explains that ...the abundance of subjective terms in the language of the
law provides a large margin of discretion to labor authorities. This in turn


147
.. the new conditions for labor relations were gradually inserted through a
series of tripartite pacts and agreements. Thus, the National Agreement to
Improve Quality and Productivity (ANEPC), signed in May of 1992,
marked the take-off of a policy designed to eliminate obstacles to the
flexible use of the labor force. (Pozas 1996:138)
In the 1993 tripartite pact, the established wage system was liberalized, allowing for
productivity bonuses. Yet the implementation of this reform was hampered by a tendency
to take cues from the negotiations achieved by the Congress of Work, an umbrella
organization that represents the main Mexican unions (Pozas 1996:139).22 The Congress
of Work usually negotiates wage adjustments with federal labor authorities and private-
sector representatives (Pozas 1996:139). These wage system reforms did not have the
desired effect of rewarding productivity. Instead, firms took their cues from the raises
mandated for minimum wage employees:
The wage adjustment would now include a fixed wage increase of 5
percent, ... and a discretionary increase linked to productivity... [F]or
minimum wage workers, the increase was fixed at 7 percent total...
[M]ost Mexican firms took the 7 percent increase as the norm on which
they based their contractual revision in 1994 and did not address the issue
of productivity bonuses... [N]o one knew how to measure workers
productivity. (Pozas 1996:139)
Thus the wage reforms did not have the intended impact of creating productivity
incentives because the traditional roles of federal labor authorities and the Congress of
Work (controlled by state-affiliated unions) continued to be influential into the 1990s.
Labor legislation also affects other aspects of the implementation of neoliberal
reforms in the labor sector. A cost-benefit gap exists between the cost incurred by the
employer in order to comply with labor and social security legislation, and the benefit
22 Also known as the Congress of Labor, as referred to above.


CHAPTER 4
CASE BACKGROUND: THE HISTORY OF THE INSTITUTIONALIZATION OF
THE MEXICAN STATE
A case study of Mexico will provide a window through which to view the impact
of institutions. Although the Mexican case is somewhat singular, it will nonetheless yield
insights that suggest trends in other states. This chapter will discuss relevant historical
features that affect the institutional composition of modern Mexico.
How will the examination of a single case provide us with insights to formulate
broader hypotheses about Latin American development or development of industrializing
countries in general? Many scholars speak of the uniqueness of Mexico within Latin
America. For example, its shared border with the United States has at times helped and at
other times hindered its development. 1 Mexicos large size and oil reserves also
differentiate it from many other Latin American countries. These unique geographical
features are matched by political and social characteristics that are also somewhat distinct
1 The U.S. is today Mexicos largest trading partner, yet relations between the two
neighbors have not always been peaceful. The Mexican American War (1846-1848),
fought over the U.S. annexation of Texas, ended with the Treaty of Guadalupe-Hidalgo,
by which half of Mexicos national territory became what is now the southwestern U.S.
Mexicos nationalization of its oil reserves in 1938 upset the U.S., and remains an issue in
trade discussions between the two. On January 1, 1994, the North American Free Trade
Agreement (NAFTA) went into effect, initiating a free trade area between the U.S.,
Mexico and Canada. (The effects of NAFTA are discussed further in Chapter 6.) For
discussion of U.S.-Mexican relations see eg., Bailey and Aguayo, eds. 1996; Cecea
1970, Handelman 1997:143-173, Rich and de los Reyes, eds., 1997.
80


205
... consumption (38 percent), for the acquisition of productive goods and
inputs (30 percent), and for the payment of debts (14 percent). This means
that at least 52 percent of the ejidatarios used the programs resources for
payments not directly related to investment and productive use.
(Covarrubias Patino 1996:110)
Thus the funds being spent on PROCAMPO have less of an effect on production than
might be expected of a program supposedly designed to help aid the modernization of the
countryside.
Although PROCAMPO is one of the governments biggest supports for
agricultural production, its payments were quite small even at the beginning of the
program. For example, in early January 1995, farmers received 400 to 450 pesos per
hectare (at the time, $30 per acre) (Lustig 1996:158). By December 1998 the payment in
real terms had slipped 40% compared to 1994 (Enciso, December 20, 1998). For 1999,
President Zedillo promised that PROCAMPO payments would maintain their real value
and not be eaten up by inflation (Zedillo, January 28, 1999). The cuts in funding have
had a profound impact on rural welfare and production has suffered severely as a result.
Given the obvious shortcomings of PROCAMPO as an incentive to the
modernization of production in the countryside, what possible role could it be playing
instead? Although neoliberal reforms aimed to separate social programs from economic
program, PROCAMPO has a heavy social component directly contradicts the spirit of
the modernization project (Appendini 1998:32). The timing of the implementation of
PROCAMPO was also suspicious. Checks were distributed to 3 million producers for the
spring-summer 1994 harvest period, just prior to the August 1994 presidential elections
(Appendini 1998:33).


67
turned into the first phase of the structural reforms which changed the
orientation of the economy: Much more than all that, and surpassing the
categorical scaffolding used by the international financing organizations,
one could assert that with these new economic politics the societal
organization of the country was being redesigned and, simultaneously, that
its politics, the state, the political system and its articulation with the
political actors would be redefined.
The New Economic Politics.. caused political and ideological
transformation as well, because it had the capacity to change the old
political concepts.. the old categories of the syndicalist and left-wing
radicalism were exorcised from the peoples minds. (Toranzo Roca
1996:166-167)
Toranzo Roca argues that the Bolivian public was ready for a new ideology after the
failure of previous economic policies (Toranzo Roca 1996:166). Yet he leaves the reader
with no sense of the other side of the development picture, namely, whether any elements
have remained unchanged, and if so, the reasons for their continuity. (Further discussion
of the Bolivian case appears in the next section.)
Another powerful example of work emphasizing elements of change rather than
continuity is Roberts and Araujos The Capitalist Revolution in Latin America (1997).
The authors declare,
As the twentieth century enters its final years, Latin America is enveloped
in tumultuous change. Countries that had for decades relied on socialist
development planning and inward-looking protectionist policies privatized,
deregulated, and opened their economies to global trade... ,[T]he new
political leaders burned their bridges to the old order.... From Mexico to
Argentina, governments subjected themselves to standards of truth,
morality, and justice, elevating the rights of the individual over privileges
that had been seized by the state. The outcome of the reforms is a rebirth
in all areas of life: economic, political, social, and spiritual. (Roberts and
Araujo 1997:10)
Their emphasis on change leads them to overstate the speed and extent of reforms to date.
By describing changes as burned bridges and rebirths, they cast aside possible impacts


177
issues and are especially pronounced in regions with a large indigenous population.30
Many of these internal conflicts are the result of years of uncertain or unresolved use
rights among ejidatarios or comuneros (those living in agrarian communities). These
conflicts characterize many ejidos, and PROCEDE has brought many old ones back to
light that had in some ways been tolerated under the ejido system. For example,
indigenous communities who have worked land communally for many generations have
institutionalized forms of land use that make completion of PROCEDE undesirable
(Stephen 1994). The head of the Oaxaca regional office of the Procuradura Agraria,
reveals why one particular agrarian community decided to stick with the status quo:
One Mixe-* 1 community came back to us with an official document from
their assembly in which they voted against entering.. PROCEDE.. They
said that the quality of their land varied considerably so that they couldnt
assign individual parcels. (Stephen, citing PA official, 1994:10)
Historically, the land use patterns in the region included crop rotation and some forms of
communal farming (Stephen 1994.10). This example provides insight into how the
institutionalized norms for production within state-created institutions (agrarian
communities) hinder privatization during the era of neoliberal reforms. The special
circumstances of agrarian communities reveal how their historically institutionalized land
use patterns hinder the progress of PROCEDE.
Aside from the groups disqualified from PROCEDE, the most recent data
available show that 7,858 agrarian groups have had problems with PROCEDE.22 This is
^ 0 Secretara de la Reforma Agraria 1998:101.
2 1 The Mixe are indigenous to this region in southern Mexico.
22 Secretara de la Reforma Agraria 1998:109 using data from the Procuradura
Agraria. Data are for December 31,1997.


19
insights from several institutional approaches, but the historical institutionalist perspective
will be shown to possess the best explanatory power for approaching the study of the role
of institutions during neoliberal reforms.
Approaches to the Study of Institutions
Institutional theories vary considerably, especially on the autonomous explanatory
power they attribute to institutions. Important similarities exist in the cycles of popularity
of the study of institutions over time and across disciplines. In economics, sociology and
political science, the novelty of institutional approaches is debated. Most institutional
theories today are thrown under a label of new institutionalism / neoinstitutionalism,
although many scholars deny that much institutional analysis is new in theoretical content
(e g., Hritier 1998).
Many scholars have attempted to organize institutional theories into various
categories.2 Institutions and Organizations (1995) by W. Richard Scott is an example of
this type of literature, providing a concise guide to an abundance of overlapping literatures
on institutions. These scholars categorizations differ in important respects, but do have
certain similarities. New institutionalism challenges the research style of behavioralist
research (Olsen 1998). Most of the categorizations set one group of institutionalists,
rational choice theorists, apart from other groups. For this reason, this discussion of
institutional theories will examine the tension between rational choice and other
institutional approaches.
2 See, for example, Scott (1995), Thelen and Steinmo (1992), Resen (1998), Keman
(1998), Hritier (1998), Immergut (1998), Koeble (1995), Kato (1996), Ethington and
McDonagh (1995) and Klein (1994 [originally 1980]).


34
sociological institutionalism, on the other hand, places so much emphasis on the limits to
rationality that it rejects the possibility that the sum of individual preferences will result in
the common good (Immergut 1998:15). This is similar to research on collective action in
the new institutional economics, which argues that rational actors will not always choose
to provide public goods. The development of institutional theories in sociology may be
viewed as a mirror image of the development of neoclassical economic ideas (Swedberg
1991: 22).
If one respects the intellectual acumen of scholars in each of these academic fields,
how is one to decipher the pendulum-swings in the acceptance of differing views of
institutions over time and across disciplines? Are the formal models of the economists
preferable due to their ability to distinguish the influence of the individual in social
modeling? Or are Durkheimian deterministic models of the new institutionalists in
sociology more useful since they unearth the impossibility of rational choice under a great
variety of common situations? Ostroms (1995) Resens (1998) and Rothsteins (1996)
arguments in favor of scholars working at different levels provide good resolution to this
apparent dilemma.
The institutional theorizing in political science known as historical institutionalism
helps to further resolve these issues. This perspective is best for the present institutional
study. As explained earlier, the insights from other perspectives will also fortify the
analysis on various occasions, especially when it pushes the limits of middle-level
(institutional, neither deterministic nor individualistic) analysis.


252
Riker, William H.. 1982. Liberalism Against Populism: A Confrontation Between the
Theory of Democracy and the Theory of Social Choice. San Francisco: W. H
Freeman and Co.
Roberts, Kenneth M. 1995. Neoliberalism and the Transformation of Populism in Latin
America: the Peruvian Case, World Politics. October, 48(1): 82-116.
Roberts, Paul Craig and Karen Lafollette Araujo. 1997. The Capitalist Revolution in Latin
America. New York: Oxford University Press.
Rodriguez O., Jaime E., ed. 1993. The Evolution of the Mexican Political System.
Wilmington, DE: Scholarly Resources Inc.
Rodriguez, Victoria E. 1997. Decentralization in Mexico: From Reforma Municipal to
Solidaridad to Neuvo Federalismo, Boulder, CO: Westview Press.
Rodrik, Dani. 1996. Understanding Economic Policy Reform, Journal of Economic S
Literature. March, 34(1), p. 9(33).
1998. A Plan to Save the World Economy, THE GLOBAL FIX, The
New Republic. Nov. 2, 17(1).
Roett, Riordan, ed. 1995. The Challenge of Institutional Reform in Mexico. Boulder and
London: Lynne Rienner Publishers.
Roett, Riordan and Guadalupe Paz. 1995. The Politics of Institutional Reform in Mexico
and Latin America, in Riordan Roett, ed., The Challenge of Institutional Reform
in Mexico. Boulder and London: Lynne Rienner Publishers.
Rothstein, Bo. 1992. Labor-Market Institutions and Working Class Strength, in Sven
Steinmo, Kathleen Thelen and Frank Longstreth, eds. Structuring Politics. New
York: Cambridgge University Press.
1996. The Social Democratic State: The Swedish Model and the
Bureaucratic Problem of Social Reforms. Pittsburgh and London: University of
Pittsburgh Press.
Ruiz, Ramn Eduardo. 1980. The Great Rebellion: Mexico. 1905-1924. 1st ed., New
York: Norton.
Salazar-Xirinachs, Jos Manuel. 1993. The Role of the State and the Market in
Economic Development, in Osvaldo Sunkel, ed., Development from Within:
Toward a Neostructuralist Approach for Latin America. Boulder and London:
Lynne Rienner Publishers.


55
1993:131)Employment absorption in modern nonagricultural sectors grew rapidly in
each area. In Latin America between 1950 and 1980 growth in employment in modern
nonagricultural sectors was 4.1 percent per year (with manufacturing reaching 3.5 percent
per year), whereas in the U S., employment in modern nonagricultural sectors grew at 4.4
percent per year between 1870 and 1910(Tokman 1993:131).
Critics of the ISI period often point to the lack of development in industry /
manufacturing sectors. Yet the comparison with a similar period of development in the
United States reveals that Latin America is not as unique as is sometimes believed
(Tokman 1993). The development of employment in the manufacturing sector was
actually similar in some ways to the earlier experience of the United States,
Between 1950 and 1980 employment in the secondary sector in Latin
America declined from 42 percent to 39 percent of the nonagricultural
labor force. Between 1870 and 1900 secondary employment in the United
States dropped from 50 percent to 48 percent. This means that the decline
of secondary employment, as well as the sharpness of this drop, is not
peculiar to Latin America, as believed in the past (ECLA 1966). (Tokman
1993:132)
Scholars who do criticize the economic development of the period argue that the
gains during the decades of the 1950s and 1960s came at the expense of future
competitiveness of the region during the 1970s and 1980s. 9 As Table One has shown, a
^ A similar type of comparison of some Latin American countries during the 1960s to the
United States during the 1880s is also made by Merkx (1991). The percentage of the
population employed by the primary sector (basically agriculture) is around 50 percent for
Brazil, Mexico and Peru during 1960 and for the United States during 1880 (Merkx
1991:159).
9 For example, Deepak Lai argues that among large debtors, especially in Latin America,
the domestic problems these countries face in raising the requisite
resources for debt service and converting them into foreign exchange.. are
due to their endemic fiscal problems and dirigiste trade control systems that


91
Gortari. The symbiotic relationship between the PRI and top business elites was brought
to light when news leaked of a private dinner Salinas held on February 23, 1993 to request
contributions of 25 million dollars from each of a handful of top businessmen (Handelman
1997:103-104).
The special relationship between the PRI and the state, as well as the corruption
and corporatism that accompanies it, helps to maintain political stability in Mexico (Knight
1996). The PRI has used its position to manipulate its future electoral success while
gradually slipping further and further from the meeting the goals once held by its original
supporting sectors:
.. the socioeconomic promises of the Constitution were, partially and
belatedly, fulfilled, while its liberal democratic provisions languished, and
would continue to languish, down to the present. For, even as they rolled
back his more radical policies, favouring capital over labour and
marginalisingrecently abolishingthe ejido, Crdenass successors
doggedly maintained the dominant party, the partido del estado. [Knight
references Garrido (1982) pp.461-2.] The latter, now sporting an
oxymoronic revolutionary-institutional label (PRI), has for over sixty
years monopolised national power, controlled a huge network of
patronage, and kept up an incestuous relationship with the state which
underpins Mexicos remarkable political stability. (Knight 1996: 225, italics
added)
The imminent downfall of the Mexican political system is questionable. As Knight argued
in the mid-1990s, the PRI will one day be defeated, but
.. .that day has been repeatedly heralded in the past and in each case it has
proved a false dawn. The cement of corruption, suitably repointed every
now and then, has held the whole edifice together remarkably effectively.
(Knight 1996:231)
The corrupt PRI/ state has historically engendered political stability (Knight 1996; Morris
1991; Topik 1993). At the turn of the millenium, the power of the PRI is at a new low,
and even the regime itself now claims only 42 percent of the national vote (Dillon 1999b).


155
Similarly, the roles of PRONASOL and PROCAMPO (Programa de Apoyo Directo al
Campo / Direct Rural Support Program) are studied both because of their size and
because they were created to buffer the difficult transition to neoliberalism. The budget
line used for PRONASOL has historically been used for poverty alleviation and
development. PRONASOL allocated US$2.2 billion to anti-poverty initiatives in 1993.
Similarly, PROCAMPO distributed 3 million checks to producers in 1994 (Appendini
1998:33). PRONASOL and PROCAMPO were the most significant government support
policies for the agrarian sector during the 1990s. This analysis of state institutions in the
agrarian sector will focus on the extent to which they advanced, had little effect on,
hindered or distorted neoliberal reforms.
Comparative Background: Agrarian Counter-Reform in Latin America
As noted above, the dismantling of the ejido is an example of agrarian counter
reform, and is intended to spur investment and competition in the countryside. Agrarian
counter-reforms occurred in a number of Latin American countries during the 1980s and
1990s as a result of the implementation of neoliberal reforms. Neoliberal counter-reform
policies aim to halt the expropriation of large land holdings, allow for the sale, renting,
sharecropping or mortgaging of agrarian reform lands, and encourage private investment.
They tend to reconcentrate lands among large-scale producers and can have a negative
impact on social indicators for much of the population, yet spur growth in the agro-export
sector (Jonakin 1996:1179).
Through a comparison of Chile and Nicaragua, this section will examine how
state-initiated agricultural cooperatives influence subsequent counter-reforms in the


25
Neoinstitutionalist Douglass North (1990) adds depth to the discussion of the
influence of institutions on economic development over time by revealing the persistence
of inefficient institutions. His work qualifies the assumptions of the rationality of decision
making by insisting that the motivations of actors are more complex than usually assumed,
and that the institutional framework limits the set of choices available to them (North
1990:17-26). Norths path dependency approach grants significance to a states
institutional development, which helps to explain why some countries have persistently
poor performance over time.
Collective action approaches, the other general approaches within the new
institutional economics, reveal the free-rider problem, namely, that rational actors will
often choose not to help provide public goods. Olson (1965) and Hardin (1968) founded
this approach theoretically (Nabli and Nugent 1989:1338). Research in this school can
explain how sub-optimal public outcomes come about, as well as to help identify what sort
of institutional framework may assist in the provision of public goods.
The growth of the new institutional economics challenged the traditional
neoclassical economic paradigm. Nonetheless, neoclassical economic theory continued to
influence development policies throughout the 1980s and 1990s. It provided the basis for
the neoliberal policy recommendations being implemented in Latin America in recent
decades. Neoliberals take orthodox perspectives on institutions. They believe that
development will occur through the implementation of macroeconomic stabilization,
structural adjustment and the free flow of international trade and capital. Policy analysts
appear now to be moving away from some of the neoliberal prescriptions originally
recommended for Latin America, in order to pay closer attention to institutional theories


40
This theme in historical institutionalists study of contingent development also resembles
the sociological institutionalist research on policy martingales, as well as that on
garbage cans.
These three themes have many areas of overlap and scholars often articulate
several of them in a single piece of work. Skocpols research emphasizes the
contingencies of development (Immergut 1998:24), yet there are elements of the other
themes in her work as well. Skocpol adopts what she calls a polity-centered approach,
which draws attention to four types of processes:
One, the establishment and transformation of state and party organizations
through which politicians pursue policy initiatives. Two, the effects of
political institutions and procedures as well as social changes and
institutions on the identities, goals, and capacities of social groups that
become involved in politics. Three, the fit or lack thereof between the
goals and capacities of various politically active groups and the historically
changing points of access and leverage allowed by a nations political
institutions. And four, the ways in which previously established social
policies affect subsequent policies over time. (Skocpol 1995:105)
The first two processes fit the thematic category of the political construction of interests,
the third process approximates the theme of the contingency of development, and the
fourth process roughly matches the theme of the contextual causality. The examination of
the impacts of state institutions in Mexico (see Chapters 5 and 6) highlights similar
processes as those mentioned by Skocpol and draws attention to all three themes
described by Immergut. The relevant variables in historical institutionalist analyses are the
institutions themselves. Institutions influence decision-making, thereby impacting social,
economic and political development.


186
The Role of the State during these Neoliberal Reforms in the Agrarian Sector
Given these effects on the implementation of neoliberal reforms, is the Mexican
state doing anything in response? Is it forcefully attempting to make the ejido less
successful, in order to encourage privatization, as was the case of the asentamientos
under Pinochet? Or is it playing a supportive, paternalistic role similar to what it always
has? A look at the states interactions with ejidatarios and ejido leaders sheds light on
these issues.
Ejido leaders use their position and access to state disbursements to perpetuate
economic and political relations that existed before the reforms began. For example, in
Zamora, Michoacn, one group of ejido leaders constructed a new building to house their
ejido organization in 1994-95, several years after the introduction of the PROCEDE
program (Goldring 1998). Through this construction, the ejido leaders were trying to
preserve relations between ejidatarios, ejido leaders, and the state, and to retain control
over economic and political resources (Goldring 1998:170). They are able to sustain and
even advance these roles in spite of the package of neoliberal reforms.
Whereas in the past, the PRI/state was able to intervene in the ejido by
maintaining ambiguous property rights, today the reforms to Article 27 actually reinforce
the institutionalized role for the state in ejido affairs (Jones and Ward 1998). The
historical precedent continues, although it may have shifted. The reforms may be
misinterpreted (Jones and Ward 1998).44
44 There is a danger of,
.. reading too much into the rhetoric and not enough into the substance of
the reform. Thus, just as Article 27 is replete with a rhetoric (or discourse)
of productivity, justice, and liberty, many of the concrete provisions of the
reform envisage constraints on rights and citizenship, and new forms of


219
this are the economic solidarity pacts (the PSE and PECEs) that made the implementation
of reforms possible but did so in a way that perpetuated a corporatist rather than liberal
form of organization. In general, older institutions have a more predictable impact on
neoliberal reforms, and that impact generally hinders the reforms. Newer institutions, on
the other hand, may advance some aspects of the reforms, but may also be heavily
influenced by older informal institutions. Thus, longevity is one important way of
distinguishing a potentially influential institution, be it formal or informal.
Two other meaningful characteristics also help to discern the relative significance
of institutions to national development: size and the presence or absence of a supportive
institutional milieu. Size is a relatively unproblematic distinguishing feature. The larger
an institution is, the more likely it is that it will influence development. Conversely,
smaller institutions have less impact. For example, another reason that the UNT was not
granted a role in the CNSM is that it is still much smaller than the CTM.2
A supportive institutional milieu refers to the extent to which other institutions
share a similar mandate as the institution under study. For example, a vast network of
organizations and individuals linked through corporatist and clientelist ties supports an
institution such as the CNC. Many formal and informal institutions bolster the CNCs
position and help maintain its significance despite urbanization and a deepening rural
poverty.
This study has highlighted the influence of a number of institutions that have a long
heritage, considerable size and a supportive institutional milieu. Of all of the institutions
2 Whereas the official unions have about 10 million members, the UNT has only about 1.5
million members (Bierma 1998).


175
completely in certain ejidos. The ejido is limiting the progress of PROCEDE, as the
following discussion demonstrates.
Information about the status of the reforms is taken from various tables in a
publication by the Secretara de la Reforma Agraria (1998), using data originally from
the Procuradura Agraria The data do not always total precisely, in part because the
source data sets are for different months. Nonetheless, they provide a reliable picture of
the PROCEDE process. As of December 31, 1997, 11,326 agrarian groups had not
received land titles.22 These untitled groups can be divided into two broad categories:
(1) those that had an unfavorable initial diagnosis (3,704, of which 3,674 were ejidos)23
and had not entered PROCEDE, and (2) those that had had problems within PROCEDE
(7,858).24 Each of these categories reveals ways that the ejido as an institution hinders
the implementation of neoliberal reforms.
The first phase of PROCEDE consists of a diagnosis resulting in a categorization
as favorable or unfavorable. The diagnosis identifies whether it is possible to
advance the certification of rights (i.e., whether it is possible to carry out PROCEDE).25
Factors that cause an unfavorable diagnosis include continued agrarian reform and its
related administrative delays as well as significant internal or external conflicts.26
22 Data in Table Three show 27,218 total ejidos, of which only 15,892 are certified.
Therefore, 11,326 were not certified Data are from December 31, 1997.
23 Secretara de la Reforma Agraria (1998:337) using data from the Procuradura
Agraria. Data are from January 6, 1998.
24 Secretara de la Reforma Agraria (1998:109) using data from the Procuradura
Agraria. Data are from December 31, 1997.
25 Secretara de la Reforma Agraria 1998:105.
26 Secretara de la Reforma Agraria 1998:106.


46
power, the linkages between past, current and future developments are revealed and
insights are gained into whether new policy designs will result in their desired outcomes.
The need for research like this on institutions is succinctly described by
sociologists Hannan and Freeman:
We have expressed reservations about the power of efficiency in dictating
change in the world of organizations. Although we recognize that
considerations of efficiency have powerful consequences for many kinds of
organizations, we feel that they do not obviously override institutional and
political considerations. ...Theory and research that address these
connections are sorely needed. (Hannan and Freeman 1989: 339)
To better understand the interactions between the international, national, and
subnational influences on development, the present research will examine the impact of
institutions primarily from a mid-level of analysis using a historical institutionalist
perspective. Where neoliberal reforms fall short of their intended goals, the impact of
institutions on the implementation of reforms is studied. Historical institutions of the state
are shown to have significant impact on the speed and depth of reforms. Various
institutional perspectives are synthesized where analytically possible and logical,
emphasizing the strengths of those most applicable to the present examination. 15
The historical institutionalist approach used here begins with assumptions about
institutions. The analysis is also supplemented with insights from the macro-level of state-
society relations. Corporatist state-society relations create patterns of behavior visible in
state institutions. Micro-level analyses revealing how the beliefs of agents affect policy
implementation also bolsters the examination. For example, in Chapter 6, an explanation
See Rothstein (1996:23) for a defense of a similar approach linking Marxist analysis,
historical institutionalism and policy implementation approaches.


250
Perspectives Series, 12, San Diego / La Jolla: Center for U S Mexican Studies,
University of California.
1996a. Neoliberal Reform and Politics in Mexico: An Overview, in
Gerardo Otero, ed., Neo-liberalism Revisited: Economic Restructuring and
Mexicos Political Future. Boulder: Westview Press.
1996b. Mexicos Economic and Political Futures, in Gerardo Otero, ed.,
Neo-liberalism Revisited: Economic Restructuring and Mexicos Political Future.
Boulder: Westview Press.
, ed. 1996c. Neo-liberalism Revisited: Economic Restructuring and Mexicos
Political Future. Boulder: Westview Press.
Palabras del presidente Ernesto Zedillo, January 8, 1999. Presidential speech in La Paz,
Baja California Sur (available via the Internet).
Perry, Guillermo and Ana Maria Herrera. 1994. Public Finances. Stabilization and
Structural Reform in Latin America. Washington, DC.: Inter-American
Development Bank; Baltimore, MD: Distributed by the Johns Hopkins University
Press.
Petras, James. 1997. Alternatives to Neoliberalism in Latin America, Latin American
Perspectives: January, 24 (1):80-91.
Pfeffer, Jeffrey. 1997. New Directions for Organization Theory: Problems and Prospects.
New York and Oxford: Oxford University Press.
Polyani, Karl. 1992 (1944). The Economy as Instituted Process, in Mark Granovetter
and Richard Swedberg, eds., The Sociology of Economic Life. Boulder: Westview
Press.
Powell, Walter and Paul DiMaggio, eds. 1991. The New Institutionalism in Organizational
Analysis. Chicago: University of Chicago Press.
Pozas, Maria Angeles 1996. Flexible Production and Labor Policy: Paradoxes in the
Restructuring of Mexican Industry, in Laura Randall, ed., Changing Structure of
Mexico. Political. Social, and Economic Prospects. Armonk, NY: M E. Sharpe.
Prebisch, Ral. 1950. The Economic Development of Latin America and its Principal
Problems. New York: United Nations.
Pressman, Jeffrey and Aaron Wildavsky. 1979[ 1973], Implementation: Or How Great
Expectations in Washington are Dashed Out in Oakland. 2nd ed., Berkeley and Los
Angeles: University of California Press.


138
concessions in exchange for political support (Collier 1992:15). Obregns successor,
president Plutarco Elias Calles was also dependent upon labor as his main source of
support (Collier 1992:16). Following this period, a conservative reaction resulted in the
Maximato (1928-1934), and the strong state-labor alliance fell apart (Collier 1992:23).
Yet the Maximato was followed by the presidency of Lzaro Crdenas (1934-1940),
during which labor and peasant incorporation peaked.
The Crdenas government encouraged the formation of new organizations of
peasants and urban workers, and grouped the new organizations into nationwide
confederations (Cornelius 1996:17). Crdenass legacy continues to be honored by many
Mexicans even to the present day. His deeds include advocating labor- and peasant-
friendly positions:
Crdenas championed the cause of urban and rural workers and committed
the state to intervene in the class struggle on behalf of the working class; he
strengthened working-class organizations to defend their interests and
encouraged workers to strike and demand wage increases, state arbitration
decisions consistently favored labor versus capital; land distribution to
peasants was increased and collective ownership of land was encouraged,
as was the socialization of means of production and the nationalization
and introduction of worker control of firms unwilling to enter into fair
collective bargains; workers came to occupy important political posts at all
levels of government; peasants and workers were armed; socialist
education was introduced into the schools; and the rhetoric of class
struggle and Marxism was adopted. (Collier 1992:25)
The CTM, the state-affiliated labor organization, was formed in 1936 and
supported by Crdenas. Fidel Velzquez, the man who would lead the CTM until his
death at the age of 97 in June 1997, co-founded the organization. Two years later, the
reorganization of the then-governing National Revolutionary Party (PNR) into the Party
of the Mexican Revolution (PRM) under Crdenas took place, which was the key event


63
that institutions matter more to development outcomes than originally assumed. They
rightly note that,
With but one exception (namely, the protection of property rights) the
policy prescriptions of the Washington Consensus ignored the potential
role that changes in institutions could play in accelerating the economic and
social development of the region... (Burki and Perry 1998:1)
The Washington Consensus generally neglected the myriad ways that institutions affect
the implementation of neoliberal reforms, be they positive or negative for development.
State institutions were generally perceived as limits on reforms that could be overcome in
the short term. The Washington Consensus viewed institutions more as hindrances to
development than as entities that might decelerate and distort neoliberal reforms.
Through the mid-1990s, neoliberals were confident about the eventual outcome of
their policies. In 1994, the mood of policy-makers and investors in Latin America was
very positive; Burki and Perry explain that, Doubters and skeptics were a small minority
and their voices were drowned out by the crescendo of the alleluia (Burki and Perry
1997:ix). This changed significantly after the Mexican peso crisis of December 1994,
which threatened investors in other parts of Latin America and other developing areas as
well.
In The Long March (1997), Burki and Perry provide a detailed analysis of the
recent status of reforms in Latin America, as well as a reform agenda for Latin America
for the next decade. They refer to first generation and second generation neoliberal
Next Decade, Washington, DC: World Bank, Latin American and Caribbean Studies
Viewpoints Series.


the economy even in the era of neoliberal reforms. The unsuccessful reforms to the
popular sector of the PRI and the 71 billion-dollar bank bailout are evidence of the
continuation of informally institutionalized corporatist and clientelist ties between the state
and key sectors. The formal economic solidarity pacts (the PSE and the PECEs) were
conceived to advance neoliberal economic priorities, but politically and economically, they
served to continue institutionalized forms of corporatist and clientelist interactions.
Similarly, the CNSM excludes radical organizations from influencing the national
minimum wage, while official unions continue to benefit from their traditional
institutionalized corporatist position. These older corporatist institutions take on new
guises and continue their historical roles, a fact that is not emphasized in the work of many
scholars today.
Historical informal norms and values remain relevant at the close of the 20lh
century. Corporatist institutions remain important during the era of neoliberal reforms,
creating outcomes that differ from neoliberal ideals. Mexicos social liberal state limits
corporatist organizations but [I]t does not .. totally exclude them from decision
making...[I]t is neoliberalism with a strong statestrong both politically and vis--vis
labor. It liberalizes the economy but subordinates labor relations to its conception of
economic development (de la Garza 1994:201). The public naming of Mexican
neoliberalism as social liberalism is evidence that the previous commitments of the state
to society influence the way neoliberal reforms are presented in Mexico, as well as the way
they come to pass.
weak interest by political parties, and 4) the lack of agreement between syndicates and
their patrons (Cervantes 1999:8).


101
incorporated groups enjoy access to privileges that nonincorporated groups cannot attain.
In exchange, they are expected to demonstrate loyalty to the PRI, especially during
elections. This system has worked to the advantage of the PRI and elites by encouraging
group leaders to respond more to the needs of the regime than to the needs of their groups
(Grindle 1996:49). Business elites lobby the regime as well, and are able to influence
policy (ibid ). Under the corporatist system, access to benefits is dependent upon political
considerations, and economic growth facilitates the system (Grindle 1996:49).
For these reasons, corporatism has been criticized as anti-democratic and biased in
favor of upper class groups. On the other hand, some analysts suggest that the corporatist
system has actually served to ease class tensions. 16 Regardless, the possible benefits of
such stability should be weighed against the means used to achieve it.
The corruption of corporatist and clientelist systems is complex and interwoven.
Political corruption in 20th century Mexico takes several different forms. The first, known
as peculation or government at the service of graft, is risky in the long-term; the other,
graft at the service of government, seems to work better in the long-term, and involves
both the carrot and the stick as methods (Knight 1996:226-227). There are functional
differences between the two variants:
There are other organizations in the labor movement that belong to the
PRI, even though not to the CTM, such as CROC (Revolutionary
Confederation of Workers and Peasants) and CROM (Regional
Confederation of Mexican Workers). Similarly, other peasant
organizations loyal to the PRI include CAM (Mexican Agrarianist Council)
and CCI (Independent Peasant Council). (Otero 1996a: 13)
16 Teichman argues that, Although operating at all levels of the social and political
systems, corporatism and patron clientelism have been particularly important in mitigating
dissent from the popular classes (Teichman 1996:150).


257
Toranzo Roca, Carlos F. 1996. Bolivia Crisis, Structural Adjustment and Democracy,
in Alex E. Fernndez Jilberto and Andr Mommen, eds., Liberalization in the
Developing World: Institutional and Economic Changes in Latin America. Africa
and Asia. London and New York: Routledge.
Tornell, Aaron. 1995. Are Economic Crises Necessary for Trade Liberalization and
Fiscal Reform? The Mexican Experience, in Dornbusch and Edwards, eds.,
Reform. Recovery and Growth. Chicago: University of Chicago Press.
Torres, Gabriel. 1998. The Agave War: Toward an Agenda for the Post-NAFTA Ejido,
in Richard Snyder and Gabriel Torres, eds., The Future Role of the Ejido in Rural
Mexico. The Transformation of Rural Mexico Series, 10, San Diego / La Jolla:
Center for U S.-- Mexican Studies, University of California.
United Nations-ECLAC. 1996. The Economic Experience of the Last Fifteen Years.
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Santiago, Chile: United Nations.
United Nations Development Program. 1999. Human Development Report. New York,
NY: Oxford University Press.
Uphoff, Norman. 1986. Local Institutional Development: An Analytical Sourcebook with
Cases. West Hartford, CN: Kumarian Press.
Vacs, Aldo C. 1994. Convergence and Dissension: Democracy, Markets, and Structural
Reform in World Perspective, in William C. Smith, Carlos H. Acua, and
Eduardo A. Gamarra, eds., Latin American Political Economy in the Age of
Neoliberal Reform. Miami: North-South Center.
Valds-Ugalde, Francisco. 1996. The Changing Relationship between the State and the
Economy in Mexico, in Laura Randall, ed., Changing Structure of Mexico:
Political. Social, and Economic Prospects. Armonk, NY: M E. Sharpe
Vargas, Roas Elvira and Elizabeth Velasco. 1999. Privatizar la Electricidad no Imlica
Despidos, Dijo Zedillo, La Jornada. February 25th
Varley, Ann. 1993. Clientelism or Technocracy? The Politics of Urban Land
Regularizarion , in Neil Harvey, ed., Mexico: Dilemmas of Transition. London
and New York: The Institute of Latin American Studies, University of London and
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1996. Delivering the Goods: Solidarity, Land Regularization and Urban
Services, in Rob Aitken, Nikki Craske, Gareth A. Jones and David E Stansfield,


173
By December 1997, the Secretaria de la Reforma Agraria maintained that
substantial progress had been made towards the goal of concluding the regularization of
land ownership by the end of the year 2,000 (A New Stage in the Mexican Agrarian
Reform, 1997:2). Yet data show that only 20,000 ejidos and agrarian communities were
certified by December 6th, 1999 ^Comunicado No. 1895 1999:1). This still only
represents 67.3 percent of total viable ejidos and communities.
Figure Two shows forecasted trends in the completion of PROCEDE. The
trajectory of the rate of completion does not suggest that the certification of all ejidos will
be complete by the end of 2000 (a national election year). Instead, if the process
continues at the average rate since 1993, it could be complete by 2002. The linear
trendline shows this potential outcome. 19
Yet the evidence suggests a different outlook: it appears that the process of titling
is decelerating. The logarithmic trendline shows an anticipated completion date around
that 2013 if the recorded rate of slowdown in the completion of titling is taken into
account.20 Both the linear and the logarithmic trendlines are presented in the same figure
in order to facilitate their comparison. The logarithmic trendline fits the data better.21
Another scenario is slowly becoming apparent: the process may simply stall out
19 This linear trendline predicts future outcomes using data on the average change per
year. This would be the best predictor if the process will be the same in the future as it
has been in the past.
2 The logarithmic trendline does a better job than the linear trendline in revealing the
potential future outcome if the data indicate a process that is accelerating or decelerating.
The logarithmic trendline calculates the potential future using information on the rate of
change.
21 The logarithmic trendline has an R-squared value of 0.9834 as opposed to the R-
squared value of 0.9764 for the linear trendline.


75
Fredianis ranking of Bolivias success with reforms adds insight into the above
comments of Dornbusch and Edwards. Frediani also describes Bolivias growth as
very Table Two: One analysis of selected Latin American countries success with
neoliberal reforms (see Frediani 1996:78). 20
Order
Country
Points achieved
Maximum points
Percentage of success
1st
Chile
50
52
96%
2nd
Argentina
38
52
73%
3rd
Peru
32
52
58%
4th
Bolivia
28
52
54%
5th
Mexico
24
52
46%
6th
Brazil
19
52
37%
yth
Uruguay
17
52
33%
8th
Venezuela
15
52
29%
20 The point totals are from 13 different categories, each with a minimum of 0 points and
a maximum of 4 points for each category. The categories are grouped into the
performance of structural reforms (privatizations, state reforms, external openness and
market regulation), stability and monetary-fiscal order (price stability, central bank
independence, international reserves and bank reforms), performance in fiscal politics
(fiscal deficit, fiscal reform, fiscal evasion and fiscal equality) and economic growth. The
points scale is as follows: 0 points = the political reforms have either not begun or are in a
planning stage; 1 point = actions have been initiated; 2 points = intermediate stage; 3
points = advanced stage; 4 points: the culmination of the process (see Frediani 1996:100-
101). Economic growth is a ranking that roughly rates annual growth rates of gross
domestic product, with Mexicos -7% rate receiving a score of 1 for growth, and Chiles
7% rate receiving a score of 4 for growth (using data from 1995) (see Frediani 1996:79
and 101).


200
and replace old corporatist structures of the CNC, the CTM and the FNOC with new ones
(Otero 1996b:238).
PRONASOL was used as a means of relegitimizing the PRI/state, and was
focused on areas where the political opposition was popular (Fernndez Jilberto and
Hogenboom 1996:153). It served as a replacement for other types of social spending, and
its hierarchical structure served to bolster presidential control (Fernndez Jilberto and
Hogenboom 1996:153). PRONASOL was used both as a means of incorporating a
variety of new groups into the PRI/state and as a way of either tantalizing or punishing
the opposition. A variety of political motivations surrounded the distribution of
PRONASOL funds:
... [Bjecause of the discretionary nature of the Solidarity Program,
decision making regarding investments in states and municipalities was
not always transparent and on occasion gave rise to allegations that
partisan political considerations affected the allocation of resources....
In.. places governed by the opposition, there was also evidence of
flooding the locality with Solidarity projects around election time.
Conversely, the argument has also been made that localities governed by
the opposition were punished by not directing any Solidarity projects to
them. (Rodriguez 1997:104)
Under Salinas, the historically populist PRI/ state used PRONASOL to perpetuate
populist and corporatist tendencies during the era of neoliberal reforms. Some scholars
suggest that populism should not always be perceived as incompatible with neoliberal
policies (see, e g., Roberts 1995). Roberts (1995) argues that personalistic leaders such
as Alberto Fujimori in Peru use neopopulist forms to support autocratic rule and
neoliberal policies. Yet he qualifies his claim by explaining that this is only true in
certain contexts:
This new, more liberal variant of populism is associated with the
breakdown of institutionalized forms of political representation that often
occurs during periods of social and economic upheaval. Its emergence


100
not fully institutionalized until the late 1930s. At this time, labor, peasant and popular
groups gained stronger organizational means of ordering their interactions with the
government. The corporatist political system set in place in the first decades after the
Revolution did have a distinctly inclusionary character when compared to many other
Latin American cases (Knight 1996; Stepan 1978). This encouraged certain forms of
corruption that fostered governmental stability and legitimacy, as is discussed below
(Knight 1996:224).
The traditionally incorporated groups remain important in Mexican politics. ^
They are represented by the long-standing Confederacin de Trabajadores Mexicanos
(the CTM or Confederation of Mexican Workers), the Confederacin Nacional
Campesina (the CNC or National Peasant Confederation) and the (often renamed)
Federacin Nacional de Organizaciones y Ciudadanos (the FNOC or National
Federation of Organizations and Citizens), whose membership is drawn from the so-called
popular sectors (Craske 1996:80, 86). The popular sector is composed of middle
classes, small business owners, government employees and professionals (McCormick
1995:263). The traditional incorporation of these three groups has been broadened to
include similar groups that represent similar interests (Otero 1996a: 13). ^ These
14 Ruth Collier argues that government policy since 1985 has sought to change the
partys coalition and social base, and to disarticulate the coalition with labor (Collier
1992:158). Middlebrook (1995), on the other hand, reveals that the governing elite had
strong reasons to preserve its alliance with labor despite the weakening of labor during the
1980s. The positions of these and other scholars on the incorporation of labor are
discussed in Chapter 5. The relative significance of the peasant sector will be debated in
Chapter 6.
1 ^ Otero explains that,


74
of 1995 (Frediani 1996:78). ^9 Included in these scores are such institutional factors as
reforms of the state, privatizations, central bank independence and fiscal reforms.
Fredianis results are summarized in Table Two.
Fredianis rankings are somewhat imperfect, but they do represent a valiant effort
at quantifying qualitative data for comparative purposes. The points scale (0 to 4) is fairly
straightforward, although it may at times be difficult to say with certainty whether, for
example, a particular reform is at an intermediate or advanced stage. Other aspects of
his ranking that are more open to challenge are the thirteen chosen categories that he
weights equally. Some critics might consider progress in one category to be of far greater
and / or more enduring significance than change in another category (e.g., should fiscal
deficit or central bank independence really be considered of equal importance to
economic growth?). On the other hand, other scholars might appreciate his attempt to
evaluate the success of reforms without overemphasizing economic growth. His use of
thirteen different categories for each of eight countries provides a fairly appropriate idea
of the big picture comparing the performance of reforms. Even Frediani himself warns
that these rankings are simply meant to provide an approximation of the evaluation of the
problem and to permit learning a global visualization about the degree of success or failure
achieved by the performance of the new paradigm [neoliberalism] in each of the 8
countries analyzed (Frediani 1996:79).
19 The book synthesizes and brings up to date the results of a 1993 CIEDLA series on
Stabilization and Structural Reform in each of the same eight Latin American countries
(see Frediani 1996:5).


CHAPTER 5
THE MAINTENANCE OF INSTITUTIONAL INFLUENCE IN MEXICO:
CORPORATIST INSTITUTIONS, PACTS, AND STATE-LABOR INSTITUTIONS
Historical Mexican state institutions influence the implementation of neoliberal
reforms during the 1980s and 1990s, as this chapter and the next will demonstrate. In
general, these institutions hinder the implementation of reforms, although at times their
impact is somewhat mixed. This chapter begins with a general review of the status of the
reforms in Mexico, which sets the stage for the presentation of a broad spectrum of
institutional effects, highlighting the impacts of both formal and informal institutions. The
maintenance of corporatist institutions and the role of pacts are debated, as well as a
number of institutions influential in the labor sector. State labor institutions are shown to
have significant effects during the implementation of neoliberal reforms. The evidence
presented here is qualitative in nature and broad in scope. The objective is to provide the
reader with a sense of the variety and significance of institutional effects.
The study of institutional effects during neoliberal reforms is inextricably linked to
an examination of the political dimension. As economic reforms spread across the globe,
so too has the push for political liberalization. Disagreement exists over the extent to
which economic liberalization is possible concurrent with political liberalization (see, e.g.,
Przeworski 1990). The tensions between political and economic liberalization are
manifested in state institutions in Mexico.
115


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10
One difference between organizations and institutions lies in the relationship
between function and existence. An organization may survive for a time without
functioning, but when an informal institution ceases to function, its very existence is
uncertain. Some historically strong institutions occasionally seem to disappear, only to be
reborn through new channels or within new organizations.8 The strength of institutions is
frequently underestimated; evidence relevant to this notion will be examined later in this
study.
Both formal (institutionalized) organizations of the public sector and more
informal understandings of the roles and responsibilities of the state towards different
social sectors will be examined. Formal institutions of the state are fairly simple to define
and conceptualize. Informal institutions of the state are more difficult to define
coherently. Informal refers to such things as unwritten and perhaps even unspoken
agreements over relations or transactions, through which customary actions carry
obligatory meanings. Informal institutions may include historical norms, values and
traditional means of interaction. The meaning of the term informal should not be
misconstrued as unimportant. Many norms that govern interactions between state and
society are informal institutions of the state (i.e., they originated from the state or came
about through repeated interaction between the state and society). Informal institutions
include corporatist political practices, involving many unwritten ties between groups
within government and certain constituencies. An example of a formal institution, on the
other hand, is the ejidal (communally-held) system of land tenure in Mexico. Nonetheless,
8 As one example, note the reform of the popular sector of Mexicos ruling party
mentioned in Chapter 5.


176
Agrarian reform was the process that created ejidos in the first place, and even
after PROCEDE was initiated, agrarian reform continued to form new ejidos. The
process continued even after the government had reversed its national goals. Inherent
contradictions characterize this process of ending agrarian reform by redistributing more
land (Stephen 1998a: 19). Officially, agrarian reform concluded on August 21, 1997, but
it continues to affect the country.22 ¡n early 1999, four thousand lawsuits related to the
reform were still in process.2^
The citizens behind these lawsuits continue to seek the benefits associated with
becoming ejidatarios. As of July 1996, the coordinator for the Ministry of Agrarian
Reform in Chiapas forecast the provision of 240,000 hectares of land to 58,000 peasants
in Chiapas (Stephen 1998a: 19). If realized, this process is certainly more important to
agrarian politics in Chiapas than is PROCEDE, which has given use-rights certificates to
29,746 ejidatarios in Chiapas (Stephen 1998a:20). In Chiapas, the perpetuation of the
ejido is having a greater impact than the neoliberal reform provision of private land titles.
The perpetuation of the agrarian reform continues to occupy state resources that might
otherwise be directed toward PROCEDE. This is another example of an institutionalized
procedure from earlier decades continuing to have an effect on development despite the
governments explicit rejection of its utility and efficacy in the neoliberal 1990s.
Grave internal conflicts and boundary conflicts are other reasons that land
titling and privatizations are proceeding slowly.2^ These are caused by a variety of
22 Secretara de la Reforma Agraria 1998:101.
2^ Secretara de la Reforma A graria 1998:101.
29 Secretara de la Reforma Agraria 1998:105.


223
some argue that the appropriate mixture depends in part on the historical period (e g., for
Latin America, state-led development made more sense in the 1950s than in the 1980s and
1990s), while others claim that certain duties should always be assigned to the state rather
than the market (e g., health care, road construction, etc.); still others argue that the
historical period is irrelevant, but that state interference with the natural operation of the
market is always a hindrance to development (e g., Latin American economic problems of
the 1980s and 1990s are a direct consequence of not allowing the market to operate more
freely in the decades following the 1940s).
Sometimes opinions converge significantly. An example is the post-1970s
neoliberal consensus over the need for market-oriented reforms (Valds-Ugalde 1996).
Both neoliberals and orthodox institutional economists shared a common confidence that
by modernizing (in practice, usually, downsizing and decentralizing) a state, the
countrys economic development would be aided through increasing efficiency. Neoliberal
recommendations were quite similar for all Latin American countries, and it was
understood that neoliberal reforms would result in an adjustment period, during which
stabilization, for example, might only be achieved at the expense of equity. However,
neoliberals did not see this as problematic, but rather, as an acceptable price that might
have to be paid for long term success. In practice, the price has been much higher than
originally foreseen for the poor in Latin America, and the payoff indefinitely protracted
The idea that it may be difficult to achieve political and economic development
simultaneously is not a new one (see, e.g., Hirschman 1958). The sequencing of progress
in various areas is important, and there is always more than one correct way of attaining a


26
and their concordant policy recommendations. Two recent World Bank publications
(Burki and Perry 1997 and Burki and Perry 1998) make this shift explicitly. The authors
refer specifically to the new institutional economics as the perspective they adopt, and
distinguish it from the neoliberal perspective (which neglected institutional influences) that
was the basis for the Washington Consensus.6
Although the new institutional economics focuses needed attention on significant
institutional phenomena, it is inherently limited by the fundamental assumptions of
rationality which form the basis of their examinations. Nonetheless, the approach was
appealing because it brought a means of conducting research using formal, deductive
methods. The influence of neoinstitutionalists in economics soon had an impact in
scholarly research in other social sciences as well. This extra-disciplinary spread of its
influence is described in the next section.
Rational choice and institutions in political science and other fields
Rational choice approaches have become increasingly popular in political science
and other social sciences. By 1992, rational choice approaches were represented in 40
percent of the articles published in the American Political Science Review, the major
journal for political science (Pfeffer 1997:13). Scholars who recognize the limitations of
this approach should welcome the insights of other theoretical perspectives. Other useful
approaches are being underrepresented in the field of political science.
6 See Burki and Perry 1998:1-2.


204
development spending. The effect of PROCAMPO on the implementation of neoliberal
reforms reveals similar tendencies.
PROCAMPO
Many of the same issues relevant in the preceding discussion of PRONASOL are
again significant when examining the impact of PROCAMPO. PROCAMPO is a
program of subsidies for producers of basic grains that began operations in late 1993 as a
means of buffering the effects of NAFTA on the producers of basic grains. It is supposed
to operate for 15 years and was designed to provide support to 3.3 million producers.
PROCAMPO has been used as a political tool by the PRI, and it contradicts the ultimate
goals of neoliberal reforms (Appendini 1998; Carlsen 1997; Enciso 1997 and 1998;
Stephen 1994). It has fallen far short of several of its original objectives. An examination
of the interplay of several institutions and norms will reveal the ways PROCAMPO has
hindered the implementation of neoliberal reforms in the agrarian sector.
PROCAMPO was created to help smooth the transition to a liberalized market in
agriculture. It was hoped that the program would help producers of basic grains switch to
the production of more profitable crops, but this has not occurred (Enciso, December 20,
1998). PROCAMPO payments go directly to producers on a per hectare basis, and can
be used to support rural consumption rather than to subsidize agricultural production.
PROCAMPO has been criticized for being a welfare program rather than an agricultural
policy (Carlsen 1997:6).
The funds can be spent however the recipients wish. A 1994 opinion survey of
ejidatarios (N= 1,098) found that PROCAMPO funds were used for a number of purposes
(Covarrubias Patino 1996). PROCAMPO funds were mainly used for:


142
CTM leaders have not successfully protected their members during the era of
neoliberal reforms (Warnock 1995). For example, in a labor dispute at Ford of Mexico in
1987, 5,000 workers were laid off, leading to a series of violent confrontations:
... [T]he Company shut its plant, laid off its 5,000 workers and declared the
contract void. A new contract was signed with CTM leaders which cut
wages by 50 percent, and eliminated seniority. When the plant reopened,
only 3,800 workers were hired back. When the union local tried to choose
its own leaders, it was confronted by the company, the police and the
CTM. On January 8, 1990, CTM thugs attacked the workers in the plant.
They even fired on them, killing one and wounding nine others. Ford
workers occupied the plant. At the request of Ford of Mexico, the Salinas
government used the police to remove the workers. (Warnock 1995:122-
123)
(The issue of seniority will be discussed in greater detail below.) These types of horror
stories regarding recent coercive measures by the CTM are all too common. In another,
more recent example, workers at the Han Young plant in Tijuana formed an independent
union in 1997. The Han Young company, the CROC (Revolutionary Confederation of
Workers and Peasants) and the CTM (both government-controlled unions), and local labor
authorities all attempted to impede the independent organizing effort, using tactics such as
firings and threats of death and violence (La Botz 1998:3).
Nonetheless, unionized workers were at some advantage during the initial
implementation of neoliberal reforms, due to previously arranged non-wage employee
benefits:
The government affiliated unions have also helped to maintain political
control by keeping lower-class demand making fragmented. From 1955 to
about 1975, through a steady stream of government-orchestrated wage
increases and expansions of non-wage benefits..., the government created a
privileged elite of unionized workers within the urban working class.
These nonwage benefits served as a cushion during the economic crisis of
the 1980s, partially insulating workers from the ravages of high inflation
and government austerity measures. (Cornelius 1996:82)


38
Themes of historical institutionalism
What sorts of evidence do historical institutionalists uncover? The work of
historical institutionalists is diverse, with three prominent themes: preference
construction /political construction of interests," contextual causality and contingent
development" (Immergut 1998:20). Within each of these three types, some theorists
approaches are more structural and some are more interpretive (Immergut 1998). Each of
these three themes is reviewed in order to reveal what types of things historical
institutionalists work on, and to better compare this type of approach to the other new
institutionalist approaches discussed above.
Historical institutionalists who work on the political construction of interests do
not claim that norms dictate to actors what should be their behavior, but rather, that,
Instead, institutionsbe they the formal rules of political arenas, channels
of communication, language codes, or the logics of strategic situations
act as filters that selectively favor particular interpretations either of the
goals toward which political actors strive or of the best means to achieve
these ends. (Immergut 1998:20, emphasis added)
By understanding that institutions act as filters, historical institutionalists emphasize the
ways that they influence outcomes. This serves as a response to the criticism of non
institutionalists who argue that institutions do not have the capacity for autonomous
influence besides that originating in the organizations membership. This type of analysis
parallels work by sociological institutionalists on experiential learning described earlier.
Historical institutionalists also examine the contextual logics of causality, that is,
they tend to see complex configurations of factors as being causally significant
(Immergut 1998: 22,19). This means that the historical circumstances are important, and


CHAPTER 3
STATE INSTITUTIONAL POWER DURING THE IMPLEMENTATION OF
NEOLIBERAL POLICIES IN LATIN AMERICA
This chapter provides a general discussion of the role of state institutions in Latin
America since the Great Depression. This historical perspective of the role of state
institutions moves through various development phases: from a discussion of import
substitution industrialization (ISI) through the crisis of the populist state and the spread of
neoliberal reforms. The goals of neoliberal reforms are examined and evidence of the
contraction of state institutions in the economic sector is presented. Yet the speed and
extent of the implementation of neoliberal reforms continues to lag behind original
expectations. This chapter begins to challenge the notion that certain neoliberal reforms
will soon achieve their goals, by pointing to noteworthy flaws that arise during their
implementation.
During the transformation to more neoliberal policies, some period of lingering
inefficient, weak and even contradictory policies is not surprising. Despite the
transformations of structural adjustment and liberalization, do some historical institutions
of the populist state continue to have an unexpectedly strong influence? Do other
institutions, although sharply curtailed by reforms, nonetheless leave heritages that
moderate the neoliberal project in a myriad of ways? Evidence of such institutional
stickiness will be considered, and the extensiveness and durability of such influences will
be further examined.
48


242
1996. Challenging the State: Crisis and Innovation in Latin America and
Africa. Cambridge: Cambridge University Press.
Gruchy, Allan G. 1969. Neoinstitutionalism and the Economics of Dissent, Journal of
Economic Issues. March, 3-17.
Haggard, Stephan and Robert R. Kaufman (eds.). 1992. The Politics of Economic
Adjustment : International Constraints. Distributive Conflicts, and the State.
Princeton, N.J. : Princeton University Press.
Hall, Peter A.. 1992. The Movement from Keynesianism to Monetarism: Institutional
Analysis and British Economic Policy in the 1970s, in Sven Steinmo, Kathleen
Thelen, and Frank Longstreth, eds., Structuring Politics: Historical Institutionalism
in Comparative Analysis. Cambridge: Cambridge University Press.
1986. Governing the Economy: The Politics of State Intervention in Britain
and France. New York: Oxford University Press.
and Rosemary C. R. Taylor. 1996. Political Science and the Three New
Institutionalisms, Political Studies. XLIV: 936-957.
Handelman, Howard. 1997. Mexican Politics: The Dynamics of Change. New York: St
Martins.
Hannan, Michael T. and John Freeman. 1989. Organizational Ecology. Cambridge, Mass.:
Harvard University Press.
Hardin, Garrett. 1968. The Tragedy of the Commons, Science. 162: 1243-1248.
Hart, John M. 1987. Revolutionary Mexico: The Coming and Process of the Mexican
Revolution. Berkeley: University of California Press.
Harvey, Neil. 1993a. The Difficult Transition: Neoliberalism and Neocorporatism in
Mexico, in Neil Harvey, ed., Mexico: Dilemmas of Transition. London and New
York. The Institute of Latin American Studies, University of London and British
Academic Press.
1993b. The Limits of Concertation in Rural Mexico, in Neil Harvey, ed.,
Mexico: Dilemmas of Transition. London and New York: The Institute of Latin
American Studies, University of London and British Academic Press.
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Institute of Latin American Studies, University of London and British Academic
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125
all reforms occur simultaneously. During the interim, old corporatist ties continue to
function, although they may adapt new forms.
Another neoliberal claim often made about corporatism in Mexico is that it is being
replaced by neocorporatism, a variant with less state control. This claim has been
exaggerated. State corporatism (corporatism in an authoritarian context) may be
distinguished from societal corporatism (corporatism in a liberal democratic context)
(Schmitter 1979:13). Similarly, the term neocorporatism is sometimes adopted to
avoid the negative connotation that can derive from the identification of corporatism with
fascism (Collier 1995:157, fn. 1). Thus the term neocorporatism is generally meant to
imply a more societally-oriented corporatism. This is true especially when applied to a
European context. However, when used to describe Mexico and other areas of Latin
America, its meaning is slightly different (Collier 1995:157 fn. 1).
In the context of the analysis of Mexico, neocorporatism continues to leave room
for significant state control. The term is used more to highlight a shift (and broadening) in
which groups are incorporated than to denote a more fundamental change in state-society
power relations. In Mexico in the 1990s, a highly controlled version of neo-corporatism is
emerging (Jones 1996:190).
The PRI now reaches out to groups that are no longer captured within the older
incorporated structures. This PRI technique of coopting disenchanted groups has
historical precedents, and reveals the linkages between the older variant of corporatism
and neocorporatism:
The project of political regeneration... has come from within, not to rid the
system of corporatism or its institutions, but to seek to renew these
institutions and to devise new methods to allow them access to the system.


248
Institutional Design in New Democracies: Eastern Europe and Latin America
Boulder: Westview Press.
Moore, Mick. 1997. Leading the Left to the Right: Populist Coalitions and Economic
Reform, World Development. July, 25(7): 1009-1028.
Morales, Juan Antonio. 1993. Democracy Economic Liberalism, and Structural Reform
in Bolivia, in Smith, William C., Carlos H. Acua, and Eduardo A. Gamarra, eds.,
Democracy. Markets, and Structural Reform in Latin America: Argentina. Bolivia.
Brazil. Chile, and Mexico. Miami: North-South Center.
Morales, Juan Antonio and Gary McMahon, eds. 1996. Economic Policy and the
Transition to Democracy: The Latin American Experience. New York: St. Martin's
Press, 1996.
Morales-Gmez, Daniel A and Carlos Alberto Torres. 1990. The State. Corporatist
Politics, and Educational Policy Making in Mexico. New York: Praeger.
Morris, Stephen. 1991. Corruption and Politics in Contemporary Mexico. Tuscaloosa,
AL: The University of Alabama Press.
1995. Political Reformism in Mexico: An Overview of Contemporary
Mexican Politics. Boulder and London: Lynne Rienner Publishers.
Morrison, Kenneth L. 1990. Social Life and External Regularity: A Comparative Analysis
of the Investigative Methods of Durkheim and Weber, International Journal of
Comparative Sociology. 31 (1-2): 93-104.
Morrow, Daniel. 1998. The Political Challenges of Advancing Economic Reforms in
Latin America: A Report Based On The First Meeting of The Carnegie Economic
Reform Network, (Carnegie Endowment for International Peace in cooperation
with the Economic Development Institute of the World Bank). (September).
Myrdal, Gunnar. 1956. An International Economy, Problems and Prospects. New York:
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Nabli, Mustapha and Jeffrey B. Nugent. 1989. The New Institutional Economics and Its
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National Union of Workers (UNT) First Anniversary Hopes and Promises Still to be
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136
State Institutions Impacting Neoliberal Reforms to the Labor Sector
As discussed above, the successful implementation of the economic solidarity pacts
depended largely on the relationship between labor and the PRI / state. Labor
incorporation is often considered the key to an understanding of the path of a states
political and economic development. 16 To what extent have neoliberal reforms pushed
the labor sector into operating according to neoliberal dictates? This section will show
that although reforms have been quite significant and detrimental to labor, a number of
formal and informal state institutions have continued to influence the pace, direction and
success of neoliberal reforms to the labor sector.
Historical Incorporation of Labor into the Corporatist System
Many state institutions have had an impact on the labor sector over time, and labor
has traditionally played an important role in the corporatist structure of Mexico. The
importance of labor grew at the turn of the 20th century as a result of changes in the
economic base of the economy. The initial incorporation of labor in Latin America took
place in response to,
...the commercial and in some cases also industrial growth that
accompanied the boom of primary product exports in the last decades of
the nineteenth century. Under the impetus of this growth, two new social
sectors were created: a working class in commerce, industry, and
sometimes exports (such as mining), and the middle sectors, whose social,
economic, and political importance had increased rapidly... (Collier 1992:9)
In Mexico, each of these two important new sectors, the working class and the
middle sectors, became incorporated into Mexicos governing regime after the Revolution
16 See, for example, Collier and Collier 1991; Middlebrook 1995.


27
Some examples of the leading scholarship applying rational choice theories to
political phenomena are Kenneth Arrows Social Choice and Individual Values (1963),
James Buchanan and Gordon Tullocks The Calculus of Consent (1962), Anthony
Downss An Economic Theory of Democracy (1957). Mancur Olsons The Logic of
Collective Action (1965) and William Rikers Liberalism Against Populism (1982).
Rational choice explanations posit that since institutions are created by, altered by and
eliminated by individuals, in order to understand political, economic or social phenomena,
scholars should focus on the motivations, decisions and actions of individuals (Zuckerman
1991).
Put somewhat differently, rational choice theories assert that institutions are for the
most part temporary in nature (Resen 1998). For this reason, the rational choice approach
lacks explanatory power when confronted with institutions that appear to contradict the
desires and plans of rational actors over extended historical periods. Although they
acknowledge that institutions can constrain actions, they have difficulty explaining how
such institutions could continue to affect outcomes. Unnecessary institutions are often
viewed as temporary or insignificant entities in the grand scheme of development policy
implementation. Rational choice institutionalists maintain that individuals should be
motivated to act to eliminate inefficient institutions in order to advance development.
Some of the fundamental problems with the rational choice approach are that:
... [A]n economic conception of choice cannot explain many things about
politics: how people form political allegiances, how they change their
minds about political issues, and why they adopt political positions on
issues that have little bearing on their own personal fortunes. Nor can
rational choice theory capture political situations in which institutions do
not offer citizens a defined range of options from which to choose. In such
situations.. the course people take cannot always be easily defined as the


78
Savastano, for example, calls Mexicos growth performance far from spectacular, and
criticizes the sluggish response of output (Savastano 1995:51). He believes the
transition ought to move more quickly in order to be considered successful. This concurs
with Fredianis evaluation of Mexicos growth. Frediani calculates that Mexican growth is
only in the initiation stages, in fact lagging behind the performance of all seven other
countries he examines. 22 Thus the case of Mexico will provide an excellent window for
the examination of the impact of institutional factors on the implementation of neoliberal
reforms.
Conclusion
In summary, the anticipated reductions in state institutional power by many
analysts in general have apparently been (and continue to be) overly ambitious. The
ensuing documentations of reductions in state institutional power are also often
overstated. At the same time, the views of institutional economists, historical
institutionalists and others have been smothered under the avalanche of a growing (and
rather uncritical) acceptance of neoliberalism in the late 1980s and most of the 1990s.
Theoretical arguments about the role of institutional factors are muted amidst
claims that development depends mainly on economic growth, with politics and public
policies being of secondary importance. National processes, including the role of
institutions in the implementation of neoliberal reforms, have been neglected in many
recent analyses of Latin American development. Some relevant exceptions to this trend
22 Frediani ranks the other countries growth as follows on his scale from 0 to 4 (see
preceding footnote): Chile: 4; Argentina and Peru: 3; Bolivia, Brazil, Uruguay and
Venezuela: 2; and Mexico:! (Frediani 1996:101).


113
change. Changes in a policy context may necessitate a corresponding change in the
policies to be implemented, and policy makers can evaluate and reevaluate the
effectiveness of their policies. When the intended results are not realized, policy makers
have the opportunity to reformulate their recommendations, although this process is often
delayed or ultimately never accomplished, as the next two chapters will reveal.
For this reason, the institutional features of the state are important to keep in mind
when studying development in Mexico or any developing country. This background on
Mexican sociopolitical organization provides the context for the discussion of the role of
institutions that follows. In Chapters 5 and 6, the formal and informal institutions that
have historically played a role in Mexican development are examined to determine their
impact on the implementation of neoliberal reforms at the end of the 20th century.
The sample of institutions examined in the following chapters is not representative
of all state institutions. State institutions linked to the private sector are not examined.--
Private sector links to the state have varied historically since the Revolution, alternating
between support and opposition for the PRI/state. State-private sector institutions
support and advance neoliberal policies in many ways. On the other hand, elements of the
private sector had also gained benefits such as manufacturing subsidies during the period
of import substitution industrialization. As these are eliminated, some neoliberal reforms
hurt parts of the private sector. While the overall impact of state-private sector
institutions may encourage and advance neoliberal reforms, in other ways, these
23 The impact of state-private sector institutions on neoliberal reforms is the subject of
other scholarship (e g., Roett 1998; Valds Ugalde 1994).


240
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Developing World: Institutional and Economic Changes in Latin America, Africa
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Alex E. Fernndez Jilberto and Andr Mommen, eds., Liberalization in the
Developing World: Institutional and Economic Changes in Latin America, Africa
and Asia. London and New York: Routledge.
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227
peasant organization, the CNC, dispensed information about PROCAMPO, the program
touted as a buffer against difficulties during the transition to agricultural liberalization
through NAPTA.5 In this case, the state-affiliated institution (the CNC) was in some
respects aiding the implementation of neoliberal reforms. Yet neoliberals during the 1980s
and 1990s saw most formal and informal institutions of the Latin American populist state
as detrimental to the advance of neoliberal reforms. Their recommendations, therefore,
were to dismantle the formal institutions and to seek to undermine informal institutions of
the populist state. Yet in situations such as this one, their sweeping recommendations to
disassemble state institutions actually served to undermine their ultimate objective of
liberalizing the economy. These irrational outcomes come about when policies are not
tailored closely enough to individual countries needs.
Even if policy implementers attempt to dismantle an institution, it may still remain
intact (perhaps, for example, through informal rather than formal means). If so, they must
also weigh the costs of attempting to do away with an institution that has a tricky
persistence. Thus as a policy is implemented, institutional factors affect the direction and
emphasis of the policy (Pressman and Wildavsky 1979). This may help to rationalize
policies during the implementation stage, but it often reflects the inadequate initial
assessment of the original policy context.
This study has challenged both the neoliberal idea that state institutions are now
largely reduced and reformed, and further, that the removal of state institutional power
necessarily facilitates development. It has mainly shown the ways in which institutions
^ Pre-dissertation fieldwork by the author in July 1993 in Jalisco, Michoacn, Oaxaca and
Puebla.


179
property owning individuals (Brown 1997:108). The differences between these two
communities exemplify why many ejidatarios attach special significance to ejido
membership. The ejido as an institution serves to perpetuate social relations desired by
many ejidatarios. These institutionalized characteristics of ejidos influence ejidatarios
decisions to disband or to maintain the status of their ejido.
Other reasons related to the ejido and the historically institutionalized
commitment of the state to agrarian reform interfere with the success of PROCEDE.
Administrative delays stemming from agrarian reform prevent 1,697 agrarian groups
from completing PROCEDE.34 Thus the states populist agrarian reform commitment to
create ejidos/ agrarian communities now hinders its present policies. Controversies with
the ownrs of lands adjacent to the ejido or agrarian community hinder another 1,591
agrarian groups completion of PROCEDE. 3 5 These controversies stemmed in part from
the uncertainties of land tenure that characterized many agrarian groups.
A lack of trust over the socioeconomic and political aspects of PROCEDE affects
another 239 groups, which is very clear-cut evidence of preferring the institutionalized
ejido to the neoliberal alternative.36 Conflicts between ejidal leadership and ejidatarios
have hindered PROCEDE in 164 agrarian groups.37 These conflicts often stem from a
desire by the leadership to maintain their control over the distribution of resources, or a
desire by ejidatarios to retain the benefits of ejidal membership. A variety of other causes
34 Secretara de la Reforma Agraria 1998:109.
3 3 Secretara de la Reforma Agraria 1998:109.
36 Secretara de la Reforma Agraria 1998:109.
3 ^ Secretara de la Reforma Agraria 1998:109.


194
force compliance with PROCEDE (Baitenmann 1988). Even the Secretara de la
Reforma Agraria (1998) itself describes the PAs biased role in the PROCEDE process,
explaining that while simultaneously diagnosing the eligibility of an agrarian group for
PROCEDE,
.. .the visitors of the Procuradura Agraria perform an important task of
instruction, to convince the members of the representative bodies and the
Ejidal Assembly of the importance and convenience by which their group
can be incorporated into PROCEDE. This task is one of the most
important, since it is a strictly voluntary program. {Secretara de la
Reforma Agraria 1998:105)
The PA staff were overworked and had incentives to force ejidatarios to choose
PROCEDE rather than allowing them to choose freely whether or not to participate in the
program:
Regional field staff were considerably overworked. Perhaps in part
because of this, the field workers have used an array of threats and
pressure tactics to force ejidatarios to voteonce and for allin favor of
joining PROCEDE.
One reason why pressure tactics were effective in this region is that the
new government agencies managed to reproduce old clientelistic control
mechanisms at a time of severe economic crisis for the coffee sector.
(Baitenmann 1998:119)
Compliance was achieved in part because of the lack of ballot secrecy at the ejidal
assembly at which the vote on PROCEDE was taken. Since votes were not secret and
ejidatarios were still very dependent on many different governmental agencies, these
agencies were able to pressure ejidatarios to comply with the wishes of the PA
(Baitenmann 1998).
This information makes the government data concerning PROCEDE compliance
more suspect. How were clientelistic ties maintained? The ejidatarios in Veracruz had
become very dependent on a number of different agencies in the years preceding


202
Ramo 0026, it ultimately operated PRONASOL using historically institutionalized
corporatist means.
The PRI appears to have frequently used PRONASOL in this fashion to gain an
electoral base, just as it did in previous decades through institutions such as the CNC and
the CTM. Yet the CTM and the CNC retained certain significance. Despite the shift in
political relevance, individuals with corporatist ties to the PRI through membership in the
CTM and the CNC were often at some advantage in the bid for funding through
PRONASOL. For example, corporatist ties were used in Chiapas to control the
distribution of PRONASOL funds:
PRONASOL was also manipulated by the state governor, Patrocinio
Gonzlez Garrido The program to support subsistence farmers with
interest-free loans was controlled not by a community or regional board as
in other states, but by the governors office, allowing him to reward
political friends in the PRI and CNC (Cano 1994). A state-level Ministry
of Community Participation, staffed by loyal PRI and CNC leaders, was
set up in early 1992 in an effort to institutionalize these arrangements....
[T]he governor also dismissed officials who attempted to support local
independent organizations. (Harvey 1998:75)
The organization of PRONASOL is also criticized for reinforcing the lack of
distinction in Mexico between party and state, and bolstering patron-client ties as a means
of achieving political goals (Craske 1996). Corporatist ties to one of the traditionally
incorporated groups, the popular sector, were actually strengthened through
PRONASOL. PRONASOL, like the PRI:
... is also organised in stratified, hierarchical and non-competing
organisations where demand-making is channelled in a top-down structure
and horizontal linkages are contained. It mirrors the organisation of the
PRI albeit with structures which focus on different issues; instead of
labour, peasant and popular sectors, we now have services, production, the
regional fund, women and schools. In regions where the Popular Sectors
traditionalists have been able to maintain their dominant position, it has
often served to strengthen their hand by becoming another resource for
them to distribute. In many of the neighbourhoods. .little if any distinction


222
of the populace hardly qualifies as developed either. Balanced development is even more
elusive to encounter than it is to define; nonetheless, scholars must not use this as an
excuse to accept improvements in one aspect of development as a genuine sign of gains
towards ideal overall development.
Deciding whether an institution is good for development is not always as simple as
asking whether or not it advances national development policy reforms, since there are
frequently regional or sectoral impacts that require a more elaborate approach. For
example, regional characteristics may necessitate extra protection for environmental
reasons, reasons of significance to indigenous groups, or other geographical or social
conditions. Regional institutions that are counterproductive in terms of a national policy
may make more sense if local circumstances are considered. Thus institutional
stickiness may benefit regional development. Similarly, sectoral needs often deserve
special arrangements. For example, attention to a particular sectors needs may prevent
the initiation of a chain reaction of events that would ultimately undermine other aspects
of development policy.
The ejido represents one example of how institutional stickiness may sometimes
aid development. Although national policies aim to dismantle ejidos in favor of private
landholdings, Chapter 6 presented evidence that some ejidos rotate lands to lay fallow,
thereby preventing overuse of marginal lands. Similarly, institutions such as the Federal
Labor Law serve to maintain benefits for workers employed in the formal sector.
Debates rage in the social sciences over the proper roles for the market and the
state in development. Although virtually all scholars agree that both are necessary for
development, they are sharply divided over which mixture is most effective. For example,


42
Policy implementation literature examines the compatibility between a given
policy and the specific state organization responsible for implementing it (Rothstein
1996:21). Studies of implementation stem from a Madisonian tradition in American
politics; this tradition is wary about too much governmental action, and they are cautious
about the concentration of governmentalespecially administrativepower (Kettl
1993:407). The study of policy implementation was formalized with the publication of
research by Jeffrey Pressman and Aaron Wildavksy (1973). ^ Pressman and Wildavsky
explain that,
The study of implementation requires understanding that apparently simple
sequences of events depend on complex chains of reciprocal interaction.
Hence, each part of the chain must be built with the others in view. The
separation of policy design from implementation is fatal. It is no better
than mindless implementation without a sense of direction. (Pressman and
Wildavsky 1979 [ 1973]:xxiii)
Implementation studies focus on the program as the unit of analysis rather than the
organization, as other types of public administration studies do (Kettl 1993:413).
The study of policy implementation evolved through three stages following the
publication of the pioneering work by Pressman and Wildavsky (1973) (Kettl 1993). In
the first stage, from 1973 through the mid-1980s, implementation literature focused on
government failure (Kettl 1993:414). The second stage literature argued that policy
implementation success was possible but context dependent (Kettl 1993:414). This stage
shares characteristics with the historical institutionalist literature emphasizing contextual
causality. Like the contextualists of historical institutionalism, these analysts had difficulty
13 Pressman, Jeffrey and Aaron Wildavsky (1979[ 1973]) Implementation: Or How Great
Expectations in Washington are Dashed Out in Oakland. 2nd ed., Berkeley and Los
Angeles: University of California Press.


181
example, complete conversion to private property is lacking even among the ejidos that
have completed the PROCEDE process in this poor southern state:
Statistics on rates of incorporation and completion released periodically by
the Procuradura Agraria do little to illustrate the programs impact on
social relations within ejidos. Perhaps the most telling statistic in Oaxaca
is that only 3 of the 36,789 parcels certified for individual use as ejido
land have been disestablished (converted to dominio pleno), permitting
their conversion to private property (Procuradura Agraria, Delegacin
Oaxaca 1995). The other 36,786 plots remain in a sort of suspended
status, measured and certified under PROCEDE but not yet converted to
individual private property. (Stephen 1998:126)
A privatization rate of 3 of the 36,789 parcels hardly seems to warrant a description
such as the most farreaching institutional change for rural Mexico since the Revolution,
as characterized above by DeWalt and Rees (DeWalt and Rees 1994:1).
Regional differences are significant, and this phenomenon of slow titling and
privatization is not unique to Oaxaca. Although in some states (i.e., Baja California Sur,
Colima, Campeche and Tlaxcala) more than 80 percent of agrarian groups are
incorporated into PROCEDE, in others (i.e., Chiapas, Michoacn, Jalisco and Guerrero),
less than 50 percent are incorporated.41 Table Five provides data from each state on
participation in PROCEDE. The total number of ejidos and agrarian communities in each
state is presented, along with the number that have received a favorable diagnosis by
PROCEDE and those that have received an unfavorable diagnosis.4^ Finally, the
number of ejidos and agrarian communities that have been certified (the last stage of
41 Secretara de la Reforma Agraria 1998:107. Field research comparing the differences
between these groups of states is needed to shed more light on the impact of the ejido on
the progress of PROCEDE.
42 These two numbers when summed do not equal the total number of ejidos and
communities because some of the agrarian groups are still being processed, and thus
cannot be qualified as either favorable or unfavorable.


12
outweigh the impact of particular politicians or other political actors. This is a very useful
means of studying the long-term impacts on development.
Chapter 3 furnishes a general discussion of the role of state institutions in Latin
America over time. A review of the role of state institutions during the era of the populist
Latin American state is followed by a general investigation into the significance of
institutional heritage during the execution of neoliberal reforms, periods most widely
characterized as times of change. During the decades of neoliberal reforms in Latin
America, scholars frequently emphasize the modifications to preexisting development
policies, thereby effectively underrating institutional continuities. This chapter will
provide evidence that it is precisely in the throes of such reforms that the influence of
historical institutions may become most consequential. A review of the anticipated
changes, the goals of neoliberal policies, and the progress of the reforms is made.
Evidence of the limits to the success of neoliberal reforms in Latin America is presented.
The delays to the success of neoliberal reforms may or may not be the result of
institutional effects. In order to descry whether institutional effects are indeed causally
significant, a closer examination of a particular case is necessary. The fourth chapter
provides background for a case study of Mexico that will provide insight into how
significant institutional effects are.
The significance of the role of historical institutions is best revealed through the
use of a case with many long-standing institutions. Mexico has the longest history of
political stability in Latin America, and is considered one of the closest followers of
neoliberal reforms. Since Mexico is such a useful case of overt continuity in a political


Confederation of Mexican Workers (CTM), the National Federation of Organizations and
Citizens (FNOC), the Federal Labor Law (LFT), economic solidarity pacts (the PSE and
PECE), the Office of the Agrarian Counsel (PA), the National Solidarity Program
(PRONASOL) and the Direct Rural Support Program (PROCAMPO). Data from the
Program for Certification of Ejido Land Rights and the Titling of Urban House Plots
(PROCEDE) reveals the continuing significance of the ejido in Mexico today. Informal
institutions such as corporatist and clientelist norms and values are also shown to have a
significant impact. Many informal institutions of the state are reincarnated within new
formal institutions, and as a result, the state functions in many of the same ways. These
institutions hinder and distort the outcomes of neoliberal reforms, and are more enduring
than is commonly acknowledged. A brief discussion of the relative significance of various
institutions is provided. This work demonstrates the powerful heritage institutions have
even during periods widely characterized as times of change. The implications of these
results for development in other Latin American cases are also reflected upon.
x


43
in generalizing their findings. The most recent stage of policy implementation literature
examines in a more integrated fashion which conditions produce which type of results
(Kettl 1993:415).
Although the literature on policy implementation is useful when combined with the
insights of other types of analyses, on its own it suffers from certain shortcomings.
Implementational analysis lacks attention to the origins of power:
The problem with implementational analysis... is its myopic view of the
organizational problem and, more specifically, its failure to address more
general questions of the configuration of political power and social
structure in capitalist societies. (Rothstein 1996:31)
The micro-level of analysis of policy implementation studies can thus best be used as a
complement to mid- and macro-level approaches. Hall (1992) describes these three levels
of viewing politics. ^
Rothstein (1996) links these different levels of analysis in his examination of the
limits of political reformism in Sweden, revealing how different levels of analysis, ranging
from the macro- to the micro-level, can be used to study reformism. State theories, such
as theories addressing the relationship between state and society, are pertinent at the
macro-level (Rothstein 1996:21). At the mid-level and micro-level, institutional theory (or
organization theory) and implementation theory are appropriate (Rothstein 1996:21).
Both Rothstein (1996) and Hall (1992) combine insights from each perspective to form an
analysis that is solid and textured.
14 Rothstein (1996) differentiates, for example, between the (macro-) overarching level
of a market economy with a democratic polity, the mid-level organization of the national
political economy such as labor union organization, the structure of firms, party system
organization, etc., and the lowest level, namely, the standard operating procedures of
public and private organizations.


235
Buitelaar, Ruud and Pitou Van Dijck. 1996. Latin Americas New Insertion in The World
Economy. New York: St. Martins Press, Inc.
Burki, Shahid Javed and Sebastian Edwards. 1996a. Dismantling the Populist State: The
Unfinished Revolution in Latin America and the Caribbean. Washington, DC: The
World Bank.
1996b. Latin America after Mexico: Quickening the Pace. Washington, DC:
The World Bank.
Burki, Shahid Javed and Guillermo E. Perry. 1998. Beyond the Washington Consensus:
Institutions Matter. Washington, DC: World Bank, Latin American and Caribbean
Studies Viewpoints Series.
1997. The Long March: A Reform Agenda for Latin America and the
Caribbean in the Next Decade. Washington, DC: World Bank, Latin American and
Caribbean Studies Viewpoints Series.
Camp, Roderic Ai. 1993. Politics in Mexico. New York: Oxford University Press.
Cardoso, Fernando Henrique. 1977. Estado Capitalista e Marxismo," Estudios Cebrap.
21, Sao Paulo, Brazil.
Carlsen, Laura. 1997. The US produced 187 mil tons of corn in the 1995-96 season,
versus 246 mil tons the prior season, Business Mexico. 7: 52+, July.
Carter, Michael R, Bradford L. Barham and Dina Mesbah. 1996. Agricultural Export
Booms and the Rural Poor in Chile, Guatemala, and Paraguay, Latin American
Research Review: Winter, 31(1): 33-49.
Cavallo, Domingo. 1997. El Peso de la Verdad: Un Impulso a la Transparencia en la
Argentina de los 90. 4th ed., Buenos Aires: Planeta.
Cavarozzi, Marcelo. 1994a. Politics: A Key for the Long Term in South America, in
William C. Smith, Carlos H Acua, and Eduardo A. Gamarra, eds., Latin
American Political Economy in the Age of Neoliberal Reform. Miami: North-
South Center.
1994b. Mexicos Political Formula, Past and Present, in Maria Lorena
Cook, Kevin J. Middlebrook and Juan Molinar Horcasitas, eds., The Politics of
Economic Restructuring: State-Society Relations and Regime Change in Mexico.
University of California, San Diego: Center for U.S.-Mexican Studies.
Cervantes, Jesusa. 1999. YSin Embargo... ?Se Mueve?: Dos Aos Sin Fidel La
Jornada. Masiosare, June 20th.


119
The political tensions between tcnicos and politicos are played out at various
levels of the Mexican political system. At the highest level, different candidates for the
presidency of the Republic represent these competing perspectives, as may be discovered
by examining the recent selection of the PRIs presidential candidate for 2000. President
Zedillo (1994-2000) promised political liberalization would occur during his term as
president, and one of his strongest actions in this direction was his decision to give up the
tradition of the dedazo. The dedazo refers to the presidents handpicking of his successor
within the ruling party. President Zedillo chose instead to institute a presidential primary
for the selection of the PRIs candidate for the presidency, and the first PRI primary was
held on November 7th, 1999.
The political positions of the PRI candidates reveals the ongoing tensions evident
in the PRI. The candidate who won the primary (with 5,337,545 of 10 million votes),
former interior secretary Francisco Ochoa Labastida, is widely known to have been
President Zedillos personal favorite. Labastida is more of a tcnico than a politico, since
he has been appointed to most of his political positions (although he has been vague about
his position on economic policies). Many Mexicans believe that if the dedazo had not
been eliminated, Labastida would have been the handpicked successor. The candidate
who most represented the traditionalist politicos, Roberto Madrazo Pintado, gained only
2,766,866 votes. After the primary, Madrazo quickly threw his support behind the
candidacy of Labastida, who previously had promised to provide Madrazos supporters
with important political posts if he won the primary. This action reveals the continuities of
the political compromise between tcnicos and politicos within the ruling PRI. If


236
Coase, Ronald. 1960. The Problem of Social Cost, Journal of Law and Economics. 3:1-
44.
Collier, David. 1995. Trajectory of a Concept: Corporatism in the Study of Latin
American Politics, in Peter H. Smith, ed., Latin America in Comparative
Perspective. Boulder, CO: Westview Press.
Collier, Ruth Berins and David Collier. 1991. Shaping the Political Arena: Critical
Junctures, the Labor Movement, and Regime Dynamics in Latin America.
Princeton, NJ: Princeton University Press.
Comunicado No. 735'' 1998. Niega el presidente Zedillo que el Procampo sea un
programa partidista o electorero. Mrida, Yucatn, February 26. Presidential
press bulletin (available via the Internet at
http://www.presidencia.gob.mx/pages/vocero/boletines/com735.html).
Comunicado No. 100.'' 1997. Los Pinos, January 7. Presidential press bulletin (available
via the Internet at
http://www. presidencia, gob, mx/pages/vocero/boletines/coml 00, html).
Comunicado No. 1895." 1999. Armona Social y Seguridad Jurdica en el Campo
Mexicano Atraern ms Inversiones en el Siglo XXI," Los Pinos, December 6.
Presidential press bulletin (available via the Internet at
http://www.presidencia.gob.mx/pages/vocero/boletines/coml895.html).
Constitucin Poltica de los Estados Unidos Mexicanos, Trigsima Quinta Edicin,
1967, Mxico, D. F.: Editorial Porrua, S. A
Cook, Karen Schweers and Margaret Levi, eds. 1990. The Limits of Rationality. Chicago:
University of Chicago Press.
Cook, Maria Lorena, Kevin J. Middlebrook and Juan Molinar Horcasitas. 1994. The
Politics of Economic Restructuring in Mexico: Actors, Sequencing, and Coalition
Change, in Maria Lorena Cook, Kevin J. Middlebrook and Juan Molinar
Horcasitas, eds., The Politics of Economic Restructuring: State-Society Relations
and Regime Change in Mexico. University of California, San Diego: Center for
U S.-Mexican Studies.
Cornelius, Wayne A. 1996. Mexican Politics in Transition: The Breakdown of a One-Party
Dominant Regime. Monograph Series, 41, University of California, San Diego:
The Center for U S.-Mexican Studies.
1995. Designing Social Policy for Mexicos Liberalized Economy: From
Social Services and Infrastructure to Job Creation, in Riordan Roett, ed., The


213
Chapter 3 also presented data from Frediani showing that a number of Latin
American countries have achieved less than 50 percent success with their neoliberal
reforms (Frediani 1996:78). Out of a group of eight countries, Mexico ranks as having
achieved 46 percent success with its neoliberal reforms, and its growth performance lags
behind that of the seven others (Frediani 1996:101). Problems with the implementation of
neoliberal reforms have been noted by many scholars, and even the International Monetary
Fund (IMF) now talks about the need for a second generation of reforms, highlighting the
need for institutional reforms (see, e g., Burki and Edwards 1996a; Burki and Perry 1997
and 1998; Cavarozzi 1994; Graham 1990; Ramamurti 1999; Savastano 1995).
Chapters 5 and 6 revealed evidence of the influence of institutions on reforms in
Mexico. Chapter 5 reviewed the impact of corporatist institutions, pacts and state-labor
institutions. A rift between modernizing tcnicos and traditionalist politicos was shown to
influence policy making at all levels of government. President Salinas (1988-1994)
pursued neoliberal tenets while calling his model of development social liberalism, but in
practice the model did not achieve the results anticipated by neoliberals (de la Garza
1994:200-201). An informally institutionalized pact among social actors and the state
made historically incorporated groups expect assistance from the state, and caused the
traditionalist politicos in the state to approach reforms in ways influenced by corporatist
ties. Formal economic pacts signed during the 1980s and 1990s are examples of
institutions that had mixed impacts on neoliberal reforms. On the one hand, they brought
stability during a difficult economic era for Mexico, and helped to ensure the longer-term
maintenance of a regime advocating neoliberal development policies. Yet on the other


134
International Monetary Fund (IMF) (Aspe 1993:34). These pacts served to control
inflation, evidenced in the decline in the annual rate of inflation from 131.8 percent in 1987
to 9.8 percent in 1993 (Middlebrook 1995:215 and 264). The early pacts regulated prices
in 1988 and 1989 (in contradiction to neoliberal ideals), but price regulations were relaxed
in 1990 and even more so in 1991 (Lustig 1998:111).
The annual national economic pacts were used until the formal pacto process
ended December 31, 1997 (Bierma 1998:3). 15 They served to reformulate the social pact
between the state, traditionally incorporated groups and business. The pacts mended
fences between the state and business, and maintained significant corporatist control over
labor (Heredia 1992:19). Nonetheless, the pacts were the high points of union
participation in national economic policy during the period of neoliberal reforms (de la
Garza 1994:211). The government provided some relief to workers who endured wage
cuts by controlling the price of staples (Lustig 1998: 111).
Elsewhere in Latin America, conflictive business-state relations helped to stimulate
transitions from authoritarian rule and the liberalization of economies, but the Mexican
transition has been muddled (Heredia 1992). In Mexico, the processes of political
change have actually reinforced aspects of authoritarianism:
15 For 1998, on the other hand, budgetary matters were worked out among opposing
parties in Congress, in what Mexican City economist Jonathan Heath has described as true
negotiations with elected representatives:
What finally buried the pacto was the fact that... July 6 [1997] for the first
time you had an opposition Congress...The elections changed the rules of
the game. This year the government had to sit down with Congress and
carry out a true negotiation with representatives who were elected by the
majority of the population .. and not with a few un-elected business or
labor leaders. (Quote cited in Bierma 1998:4.)


183
PROCEDE, but not the same as privatization) is shown in the last column
The states that have the highest levels of incorporation into PROCEDE are
located in the northern part of the country, characterized by large land holdings and
greater mechanization of agricultural production. Ejidal and communal land holdings
also have less significance in the north than in the central and southern states. Many
indigenous communities (usually agrarian communities rather than ejidos) resist
privatizing, and many indigenous communities are found in the southern and central
states. Whereas by early 1998, 81.1 percent of all ejidos nationally were incorporated
into PROCEDE and 58.6 percent had finished certification, in municipalities with
indigenous populations, only 60.3 percent were incorporated and a mere 37.7 percent had
finished certification (Secretara de la Reforma Agraria 1998:153).
Many ejidatarios are going along with the first elements of PROCEDE but do
not want their land to become fully private (Goldring 1998). The ejido serves a number
of different roles for them:
Facing a very stressful economic context, they are attempting to hang on
to some security by selectively appropriating PROCEDE as an element of
the reforms while stopping short of full privatization. .Some simply want
to keep renting out their land and receiving lots; others emphasize the
importance of the ejido in their personal and family history; yet others
want to retain access to opportunities for economic and political mobility.
(Goldring 1998:170)
Many ejidatarios view the first part of the PROCEDE program as sufficient to their
needs.
The significance of ejidal membership to younger generations is revealed through
a study in Oaxaca:
The liberation brought by Zapata and the ejido facilitated by
Crdenas...are cited in the community...as a critical step which began to
lift the community out of poverty and allowed it to shed its image as a


29
(1864-1920), whose work heavily influenced the subsequent development of sociological
institutional theories (Scott 1995:9). Sociological institutionalism has been roughly
divided into an old and a new institutionalism (see, e.g., Selznick 1996; Stinchcombe
1997). The distinction revolves around the extent to which human interactions may be
considered as driven more by self-interested actors or culturally defined procedures, as
explained below.
The two best-known early scholars of economic sociology are Durkheim and
Weber. The two figures had distinct impacts on the field of sociology:
. .Durkheim. ..essentially sought to bring sociological subject matter within
the confines of a positivist methodology. This methodology... principally
took the view that laws must be subject to the test of fact and thereby
stressed the criterion of observability. Accordingly, most of the
programmatic statements Durkheim made about sociological subject matter
tended to equate sociological events with external regularity and this may
explain Durkheim's use of the claim consider social facts as
things.. .Weber's work, on the other hand, emphasized the subjective side
of social action and in this respect knowingly rejected a methodology
which tended to equate social life with external regularities. (Morrison
1990:93)
Webers impact on economic sociology was to integrate the idea of interest-driven
behavior with the idea of social behavior in one and the same analysis (Swedberg
1998:3). Durkheims impact on the study of institutions provided support for the
exploration of the cultural dependency of human relationships, while Webers analytical
heritage is a blend of both culturally derived M>d self-interested behavior.
The heritages of Durkheim and Weber influenced both the old and the new
institutionalism. The old instiutionalists in sociology (like the old institutionalists in
economics) were also shaped by the work of institutional economists such as Veblen and
Commons (Stinchcombe 1997:1). Philip Selznick (1949, 1957) is one prominent example


36
they have in the past, or in ways that reflect their historical development, rather than in a
reformed way advocated by current policies. Institutions with a long and significant
history may have a very different impact than newer institutions during a period of
reforms. Alternatively, new institutions may claim critical space.
Growth of historical institutionalism
Historical institutionalism, like other forms of new institutionalism, grew out of a
critique of the behavioralism of the 1950s and 1960s. Although some scholars did focus
on institutions during this earlier period, an enlivened debate about the role of the state
and its institutions was forged in the late 1970s and 1980s by scholars such as Peter Hall,
Peter Katzenstein, Theda Skocpol and Alfred Stepan. ^ These scholars emphasized the
significance of the state, state institutions and state-society relations in political economy.
Stepan, for example, describes a lack of institutionalization by the Peruvian
military regime from 1968-1975 (Stepan 1978:291-292). He defines institutionalization as
follows:
Institutionalization is a distinct process from that of installation and is not
just a matter of longevity. Institutionalization implies that a regime has
consolidated the new political patterns of succession, control, and
participation; has managed to establish a viable pattern of economic
accumulation; has forged extensive constituencies for its rule; and has
created a significant degree of...hegemonic acceptance in civil society. It
also implies that the majority of the weighty political actors in the polity are
pursuing strategies to further their positions within the new institutional
See Peter Hall, Governing the Economy: The Politics of State Intervention in Britain
and France (New York: Oxford University Press, 1986); Peter Katzenstein, Between
Power and Plenty (Madison: University of Wisconsin, 1978); Theda Skocpol, Bringing
the State Back In: Strategies of Analysis in Current Research, in Peter B. Evens,
Dietrich Rueschmeyer and Theda Skocpol, eds., Bringing the State Back In (Cambridge:
Cambridge University Press, 1985) and Alfred Stepan The State and Society: Peru in
Comparative Perspective (Princeton. NJ: Princeton University Press, 1978). See Thefgn
and Steinmo (1992) for a summary of the development of historical institutionalism.


53
nationalized key industries such as oil, utilities and iron and steel, and
established new ones. This produced a large state sector, intended to play
a leading role in developing the economy;
supported an overvalued exchange rate, making Latin Americas exports
expensive and imports cheap. This hurt exports, but helped industry by
reducing the price of imported machinery and inputs, while tariff and non
tariff barriers ensured that the relative cheapness of imports did not
undercut their products. An overvalued exchange rate also kept inflation
down by ensuring cheaper imports. (Green 1995:16-17)
This enormous role for the state came under attack under neoliberalism. The ISI model
contained some inherent economic flaws. ^ These flaws were the focus of growing
criticism from the 1970s onward. In the 1990s, such state-led development policies may
appear to have been overly reliant on political, rather than economic, incentives to
development. Given the strength of the current neoliberal consensus, such plans today are
discarded as recipes for stunted national development in the long term.
What was the actual result of the application of this advice? Conclusions vary
depending upon the observer. Evidence shows that in terms of economic growth, post-
World War Two performance was in fact quite remarkable (Teitel 1992). As one analyst
acclaims, During the period 1950-80, Latin Americas gross domestic product (GDP)
increased at an average yearly compounded rate of 5.5 percent, a performance not
significantly surpassed by any other group of countriesdeveloped or developing (Teitel
7 The inherent economic flaws have been elaborated by Dietz:
Latin Americas model of growth and development.. .depended for its
dynamic on a relatively small proportion of the domestic population with
sufficient disposable income to purchase the output of the promoted
industries, an output often of lower quality and higher price than the
foreign substitutes suppressed by the high tariff barriers of ISI. The
inherent growth limits of this strategy as a motor of development, absent a
more equitable distribution of income, are indisputable. (Dietz 1995a: 11)


84
and the formation of post-revolutionary regimes provide insights into the shape of the
modern governing regime and the forces that sway it.
Francisco I. Madero called the nation to armed rebellion against Diaz, founded the
Anti-Reelectionist Party and advocated electoral reforms and public education (Camp
1993:38). He was responsible for the revolutionary 1910 Plan of San Luis Potos 6 and
ousted Diaz in 1911. Madero ruled until his assassination 1913, when a coup dtat by
Victoriano Huerta removed him with the support ofporfiristas. President Huertas
authoritarian tactics were not readily tolerated, however, and shortly after gaining power,
Revolutionary forces again gained momentum in different areas of the country. These
groups were led by Venustiano Carranza, Alvaro Obregn, Plutarco Elias Calles,
Francisco Pancho Villa, Emiliano Zapata and Pascual Orozco. The four years that
followed were the most violent years of the Revolution.
Class-based needs and geographical variability characterized the demands of
different Revolutionary groups. For example, the Zapatistas in the south placed greatest
emphasis on the demand for land. The followers of Villa in the north sought regular
employment. But neither Zapata nor Villa could unite the country; instead such leadership
was gained in 1914/15 by Carranza and Obregn (Brandenburg 1964: 53). The Carranza-
Obregon combination promised a real social and political transformation (Brandenburg
1964:53).
6 The 1910 Plan of San Luis Potos advocated three important political items: no
reelection; electoral reform (effective suffrage); and revision of the Constitution of 1857
(Camp 1993:38).


98
corporatist forms of governance creates a space for the newest variant of corporatism,
namely, neocorporatism.
Since neoliberal reforms of the 1980s and 1990s intend to dismantle the remaining
non-democratic (when compared to a liberal ideal), economically inefficient
corporatist forms of social interaction, these decades (and the ones to follow) are well-
suited to an examination of whether such changes actually occur. Corporatism runs
counter to neoliberalism because it is nationalist. ^ Nationalist corporatist sociopolitical
organization is supported by the informal institutional support for Mexicanism (dating
from the Revolution) described earlier in this chapter. Corporatism is also linked to ISI
policies. Since both corporatism and ISI policies shared a common nationalism, the
former became subject to the same judgments of the latter. As discussed in Chapter 3, ISI
represented an economic development strategy that was widely considered a failure by the
early 1980s, and corporatism was the sociopolitical organization that was supposed to
have helped ensure its viability.
Between 1970 and 1981, government expenditure had climbed from 20 percent of
Mexican Gross Domestic Product (GDP) to 35 percent (Wyman 1983:4). The budget
deficit grew from an average of 2.5 percent of GDP in 1965-72, to an average of 8
Wiarda describes the links between corporatist ideology and nationalism:
Corporatist ideology was nationalist in two ways. It implied a rejection of
the foreign influences...implanted in Latin America contrary to its own
cultural traditions, a repudiation of moral, political, and economic
dependency. It meant also a search for what was viable in Iberias and
Latin Americas own traditions on which a new nationalist sociopolitical
structure could be based. .. [Latin Americans were] seeking to discover in
their own histories an indigenous framework for national development.


254
1996. Institutionalism Old and New, (40th Anniversary Issue)
Administrative Science Quarterly. 41 (2): 270-278.
Sheahan, John. 1998. Changing Social Programs and Economic Strategies: Implications
for Poverty and Inequality, Latin American Research Review: Spring, 33(2): 185-
196.
Sikkink, Kathryn. 1991. Ideas and Institutions: Developmentalism in Brazil and Argentina.
Ithaca: Cornell University Press.
Silva, Patricio. 1991. The Military Regime and Restructuring of Land Tenure, Latin
American Perspectives 18( 1): 15-32.
Simon, Herbert A. 1957. Administrative Behavior: A Study of Decision-Making Processes
in Administrative Organization. 2nd ed., New York: Macmillan.
Skocpol, Theda. 1985. Bringing the State Back In: Strategies of Analysis in Current
Research, in Peter B. Evens, Dietrich Rueschmeyer and Theda Skocpol, eds.,
Bringing the State Back In. Cambridge: Cambridge University Press.
. 1992. Protecting Soldiers and Mothers: The Political Origins of Social
Policy in the United States. Cambridge: Cambridge University Press.
1995. Why I am a Historical Institutionalist, Polity. 28(1): 103-106.
Smith, William C., and Carlos H. Acua. 1993. Future Politico-Economic Scenarios for
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Smith, William C., Carlos H. Acua, and Eduardo A. Gamarra, eds. 1993. Democracy,
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85
Popular consensus was limited and political succession during the next decade was
marked by strife, exile and assassinations as a result of class and regional disputes.
Nonetheless, several generalizations may be made about the impact of the Revolution on
national political opinions. One important informal institution that grew out of the
Revolution is a theme of Mexicanism or Mexicanization (see, respectively,
Brandenburg 1964:68 and Camp 1993:39). Roderic Ai Camp explains that
Mexicanization is a broad form of nationalism, encompassing economic nationalism, pride
in Mexican national and cultural heritage, as well as attention to indigenous heritage
(Camp 1993:39-40). Mexicanism was also termed revolutionary nationalism
(Middlebrook 1995:302). Revolutionary ideology was evident in Revolution-oriented
educational institutions, the art of the famous muralists Rivera, Siqueieros and Orozco,
and in music, architecture and literature (Brandenburg 1964:68).
Revolutionary ideals took shape in the early 20th century. Some ideals gained
official status, with their heritage readily observed in formal Mexican institutions
throughout the post-Revolutionary period. Others remained more elusive, and are
described by one scholar as revolutionary myths (Erfani 1995). For example, Erfani
argues that the idea of a strong state was merely a myth created by a misinterpretation of
state sovereignty as state power, when in fact the executive branch of government in
Mexico was culturally and legally obligated, but not actually equipped, to control the
economy in order to protect popular groups socioeconomic interests (Erfani 1995:58).
Belief in the power of the state was thus an informally institutionalized ideal. The list of
formally and informally institutionalized ideals includes such general concepts as social
justice, the acceptance of a strong state, the breakup of large landholdings, acceptance of


109
was reduced and interest payments were lowered (Heath 1998:47). Salinas also initiated
PRONASOL to ameliorate extreme poverty (as discussed in Chapter 6). Nonetheless,
Mexicos GDP per capita grew at declining rates during the Salinas sexenio, and domestic
savings fell.
Mexico began negotiations for a free trade area with the U.S. in 1990, and
NAFTA went into effect on January 1, 1994.20 NAFTA became the worlds largest free
trade area. Mexico also signed a free trade agreement with Chile in 1991, and pursued
free trade agreements with Central America, Colombia and Venezuela (Lustig 1998:134-
135). Stronger ties with Europe and Japan were also high priorities. In 1994, Mexico
became a member of the Organization for Economic Cooperation and Development
(OECD)
These trade agreements liberalized trade among the participating countries, but at
the same time they contradicted the neoliberal ideal of liberalizing trade universally.
Through the creation of these specialized trade agreements, member countries gained a
special interest in development issues affecting their trading partners. These linked
interests have had a significant effect on the U.S. response to economic crises in Mexico
since the NAFTA.
Following these moves to liberalize trade, in 1994-95 Mexico experienced another
severe economic crisis, often referred to as the peso crisis. The peso was severely
devalued, falling from 3.46 to the dollar in December 1994 to 6.33 per dollar by mid-
1995, and to 7.54 by early 1996 (Handelman 1997:139). Analysts argued that the peso
20 As mentioned earlier, the effects of NAFTA are discussed further in Chapter 6.


33
Hannan and Freeman reveal the significance of this imprinting on a variety of
institutions.
These ideas from sociological institutionalism also found their way into scholarship
in political science. Dan Cochran is a political scientist who discusses the historical
imprinting of institutions and the impact of institutions on development. He describes the
relationship between an institutionalized regime and organizations, maintaining that a
regime creates,
... regularized patterns of interaction that maintain people in relatively
consistent relations over time. It must structure behavior... through
creating rules, beliefs, and relationships, many of which will be fostered by
and expressed through formal organizations. (Cochran 1994:18)
Cochran stresses the importance of institutionalization over the simple creation of
(weakly- or non-institutionalized) organizations in service to the state.
Rothstein (1996) similarly highlights the impact of organizational history on future
performance. He relates that,
As with other institutions, organizations may be viewed as frozen
ideologies. The norms, meanings, and goals which at one time had
furnished the reasons for establishing them remain embedded in the
organization long after these reasons have vanished. Organizations, as
other institutional arrangements, tend thus to a certain stickiness (March
and Olsen 1989; cf. Shepsle 1989). When an organization is established,
then, it is endowed with certain values, norms, repertoires, standard
operating procedures, etc., which will be very difficult to change in the
future (Jelinek et al. 1983; Olsen 1983; Selznick 1949, 10). (Rothstein
1996: 35-36)
The significance of frozen ideologies and institutional stickiness is discussed further in
the chapters that follow.
In sum, the old sociological institutionalism left some theoretical space for
individual rationality, although it emphasized many limits on rationality. The newer


106
Rather than assuming that a period of reforms represents a sea change in political
accountability, reforms might better be judged as part of a longer historical process.
When this cycle of corruption and reforms is forgotten, scholars tend to overemphasize
the depth and efficacy of new policies, losing sight of the developmental impact of
historically institutionalized processes of governance and control.
An incumbent can point to problems that are belatedly becoming obvious and use
them to garner support for his proposed reforms, even if they include austerity programs
or policies with a high initial / short term social cost. He can attempt to pass the blame for
the emerging problems to external or extenuating circumstances, rather than poor
governance, thereby retaining as much respectability as possible for his party. By the
second half of the sexenio, some of the new policies take a toll on certain social groups.
Some groups benefit at the expense of others. In order to perpetuate the PRI regime, the
president must attempt to regain the loyalty of some of them. Through the use of
corporatist and clientelist means, the ruling party targets select disenchanted groups,
making them the beneficiaries of government programs and heavily publicizing the ensuing
improvements in their situations. This apparent progress coincides with the fifth and sixth
years of the sexenio, and serves to win the votes of significant factions in the next round of
elections.
These and other factors combine to increase the level of corruption at the end of
each sexenio. This has led to the institutionalization of what is know as the year of
Hidalgo, the scramble for money and personal gain at the end of the term of political
office:


241
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Craske, Gareth A. Jones and David E. Stansfield, eds., Dismantling the Mexican
State?. London: Macmillan Press and New York: St. Martins Press.
Goldring, Luin. 1998. Having Your Cake and Eating It Too: Selective Appropriation of
Ejido Reform in Michoacn in Wayne A. Cornelius and David Mhyre, eds., The
Transformation of Rural Mexico: Reforming the Ejido Sector. U S. Mexico
Contemporary Perspectives Series, 12, San Diego / La Jolla: Center for U S
Mexican Studies, University of California.
Gonzlez Gmez, Mauricio A. 1998. Crisis and Economic Change, in Susan Kaufmann
Purcell and Luis Rubio, eds., Mexico Under Zedillo. Boulder: Lynne Rienner
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Modernizacin del Estado Mexicanoin Carlos M. Vilas, Coordinador, Estado y
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Westport, London: Praeger.
Granovetter, Mark 1992 [1985], Economic Action and Social Structure: The Problem of
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of Economic Life. Boulder: Westview Press.
and Richard Swedberg, eds. 1992. The Sociology of Economic Life.
Boulder: Westview Press.
Grayson, George W. 1998. Mexico: From Corporatism to Pluralism. Fort Worth:
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North American by Monthly Review Press.
Grindle, Merilee S 1994. Sustaining Economic Recovery in Latin America: State
Capacity, Markets and Politics. in Graham Bird and Ann Helwege, eds., Latin
Americas Economic Future London: Academic Press.
1995. Reforming Land Tenure in Mexico: Peasants, the Market and the
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209
advance the goals of the Procuradura Agraria shows that institutions may simultaneously
advance certain aspects of neoliberal reforms while undermining other intended benefits.
The critiques of PRONASOL and PROCAMPO concur. Partisan political incentives
drive the maintenance of the use of formal and informal institutions; these institutions in
turn contradict the mandates of PRONASOL and PROCAMPO to further the neoliberal
agenda.
Not all institutional effects are covered in these two chapters of evidence
(Chapters 5 and 6), but they have nonetheless drawn out some important ways institutions
impact neoliberal reforms. Given the significance of institutional effects on neoliberal
reforms in Mexico, what does this imply for developing areas in general? As explained
in Chapter 3, Mexico provides a window through which to observe a phenomenon
relevant in many developing countries. Since it has been considered one of the closest
followers of neoliberal reforms, the unmasking of the influence of institutions in Mexico
suggests that similar trends likely exist in other Latin American states as well. The
implications of this for development in the long-term will be discussed in the concluding
chapter, along with some suggestions for integrating an understanding of a nations
institutional framework into the formation and application of development policies. The
institutional framework of each state should be taken into greater account when
developing and applying development policies.


238
Diamond, Larry, ed. 1993. Political Culture and Democracy in Developing Countries,
Boulder and London: Lynne Rienner Publishers.
Dietz, James L., ed. 1995. Latin Americas Economic Development: Confronting Crisis,
Boulder, CO: Lynne Rienner Publishers.
Dietz, James L. and James H. Street, eds. 1987. Latin Americas Economic Development:
Institutionalist and Structuralist Perspectives. Boulder, CO: Lynne Rienner
Publishers.
Dillon, Sam. 1999a. Runaway Banks Without Brakes: Mexicos $71 Billion Lesson,
New York Times. July 22.
1999b. Ruling Party, at 70, Tries Hard to Cling to Power in Mexico, New
York Times. March 4.
1998. Airline Strike in Mexico Marks a Transition, New York Times,
June 8.
DiMaggio, Paul J. and Walter W. Powell. 1991. Introduction, in Walter W. Powell and
Paul J. DiMaggio, eds., The New Institutionalism in Organizational Analysis.
Chicago: University of Chicago Press.
Dornbusch, Rudiger and Sebastian Edwards, eds. 1991. The Macroeconomics of
Populism in Latin America. Chicago and London: The University of Chicago
Press.
, eds. 1995. Reform. Recovery and Growth: Latin America and the Middle
East. Chicago: The University of Chicago Press.
Dorner, Peter. 1992. Latin American Land Reforms in Theory and Practice: A
Retrospective Analysis. Madison, WI: University of Wisconsin Press.
Downs, Anthony. 1957. An Economic Theory of Democracy. New York: Harper and
Row.
Durkheim, Emile. 1947. The Division of Labor in Society, (translated from the French by
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1951. Suicide, a Study in Sociology (translated by John A. Spaulding and
George Simpson; edited, with an introduction by George Simpson), Glencoe, IL:
Free Press.
1953. Sociology and Philosophy, (translated by D. F. Pocock, with an
introduction by J. G. Peristiany), London: Cohen & West Ltd.


216
crops with a comparative advantage internationally (Otero 1998). According to one
survey, this credit, together with benefits of membership in the IMSS, was the reason that
27.5 percent of them cultivated sugar (Otero 1998:98).
Some state institutions in the agrarian sector have a mixed effect on the reform
process, and some institutions interact with others, leading to unanticipated outcomes.
The conflict between tcnicos and politicos is also played out within various agrarian
institutions. One example is the Procuradura Agraria (PA) which used traditional
corporatist ties to force compliance with the PROCEDE land titling process (Baitenmann
1998). Similar use of corporatist ties is found in the PRONASOL anti-poverty program.
PRONASOL was meant to ease the transition into a neoliberal economy, and its funding
was supposed to be dispersed transparently, thereby bypassing traditional corporatist
distribution lines. Yet PRONASOL was often manipulated by politicos within the PRI as
a means of increasing the popularity of the ruling party, and traditional corporatist groups
(the Popular Sector, the CTM and the CNC) (Fernndez Jilberto and Hogenboom 1996;
Rodriguez 1997). Through PRONASOL the PRI accomplished a modernization, not a
dismantling, of corporatism (Craske 1996:89). Thus PRONASOL had a mixed impact on
neoliberal reforms.
Finally, the PROCAMPO program of agricultural payments is a state institution
that was supposed to help ease the transition to a liberalized economy in the production of
basic grains. Yet in practice, about half of its resources are used on things other than
investment and productive use (Covarrubias Patino 1996:110). Instead, the program
functions as a political tool (Appendini 1998:33; Enciso, August 11, 1997). Thus old
corporatist norms and clientelist ties shape a political-economic system in which older


23
classical mainstream / neoclassical economics and work in old / new institutional
economics.
Gruchy (1969) calls institutional economics dissent. Klein ([1978] 1994), on the
other hand, traces the historical development of institutional economics and argues that
this school does not deserve the title of mere dissent. The old institutionalist school was
shaped by Thorstein Veblen, John R Commons, Wesley Mitchell, Clarence Ayres and
other heterodox economists (Gruchy 1969:5-6). Some scholars maintain that early
interest in institutional economics faded, as Scott suggests:
.. .the early institutional economists did not prevail: Neoclassical theory
was victorious and continues in its dominance up to the present time. Prior
to the rise of the new institutional economics in the 1970s, only a few
economists attempted to carry forward the institutionalists agenda. .(Scott
1995:4-5)
Klein, on the other hand, argues that, Far from dying out, as some appear to
think, institutionalism must be viewed as either never having died or as being in the
process of a resurrection which I suggest will endure ([1978] 1994:27). The resurrection
Klein refers to has today become known as the new institutional economics. Kleins
assertion that institutionalism never really died out in one school of economics supports
the notion that the study of institutions is well-established, albeit not mainstream, within
the discipline of economics.
Gruchy distinguishes work by the old institutionalists from that of
neoinstitutionalists such as John Kenneth Galbraith (1967), Gunnar Myrdal (1956),
Adolph Lowe (1965) and others (Gruchy 1969:6). A main distinction between the two
groups was that the neoinstitutionalists were not heavily influenced by Thorstein Veblen,
and the perceived anti-theoretical technological determinism associated with him (Gruchy


69
Other scholars make similar omissions when analyzing the Mexican case in
particular. ^ For example, Loaeza (1996) argues that in the 1980s, Mexican political
institutions were weakened. Likewise, Otero (1996) argues that a Mexican anti-poverty
program created during the neoliberal reform period undermines old corporatist
institutions. Teichman (1996) aims to demonstrate that neoliberal reforms have severely
undermined the corporatist-clientelist relations of Mexicos traditional political structure.
This is another reason Mexico is a good case for further study, since it provides a window
for determining to what extent observers of neoliberal reforms tend to overemphasize
elements of change while neglecting significant institutional continuities.
Much scholarship about the period of neoliberal reforms has tended to emphasize
elements of change rather than continuity (e.g., Edwards 1995; Loaeza 1996; Otero 1996;
Toranzo Roca 1996; Roberts and Araujo 1997; Teichman 1996). Other literature presents
a picture of the other side of the coin, of the continuities that endure the changes, as
discussed in the next section. The authors suggest greater continuity in Latin American
political-economic systems than implied by a great deal of the current literature.
Evidence of Continuity due to Institutions during Reforms
Despite the growth of literature documenting the downsizing of the Latin
American state, and its assumed positive implications for Latin American development, a
these societal transformations (Roberts and Araujo 1997:6).
17 For examples of scholarship emphasizing change in the Mexican case, see Pedro Aspe,
Economic Transformation the Mexican Way (1993), Wayne A. Cornelius, Mexican
Politics in Transition: the Breakdown of a One-Partv Dominant Regime. (1996), Wayne
Cornelius, Ann L. Craig and Jonathan Fox, eds., Transforming State-Society Relations in
Mexico: The National Solidarity Strategy. Stephen Morris, Political Reformism in Mexico:
An Overview of Contemporary Mexican Politics (1995V


28
product of a rational choice... [Rjational choice theorists particular
conception of choice.. .is also a central reason why their project to explain
politics in economic terms yields incomplete and distorted results.
(Hauptman 1996:89-90)
The normative implications of the rational choice institutionalist approach are that
the utilitarian standard (which posits that the sum of individual preferences will result in
the common good) creeps back in (Immergut 1998:15). Yet these approaches do not
deny the significance of institutions. Instead, institutions are perceived as capable of
constraining actions (Lalman, Oppenheimer and Swistak 1993:81). A problematic aspect
of one of the foundational premises of rational choice theory is that individual self-interest
may not be completely independent of the interests of others (Lalman, Oppenheimer and
Swistak 1993:97). Raising the issue of the possible interdependence of the interests of
individuals paves the way for deeper questioning of the roles of institutions.
If individuals are interdependent, what does their interdependence mean for their
preference formation? What might influence their choices? The role of institutions is
irrevocably significant. Approaches to political and economic issues that give greater
emphasis to the institutions themselves seem to be required, given these shortcomings of
rational choice approaches. Yet other new institutionalist approaches differ significantly
(Keman 1998:109). The two other main types of new institutionalism are sociological
(organizational) institutionalism and historical institutionalism.
Sociological / Organizational Institutionalism
The study of institutions in sociology experienced popularity beginning in the late
19th century. In recent decades, the resurgence of interest in institutions in other
disciplines has again focused attention on Emile Durkheim (1858-1917) and Max Weber


169
(Programa de Certificacin de Derechos Ejida les y Titulacin de Solares Urbanos or
Program for Certification of Ejido Land Rights and the Titling of Urban House Plots).
PROCEDE is executed by a number of institutions, including the Secretara de la
Reforma Agraria (SRA or Ministry of Agrarian Reform), the Procuradura Agraria (PA,
known as the Office of the Attorney General for Agrarian Affairs or Office of the Agrarian
General Counsel), the Instituto Nacional de Estadstica, Geografa e Informtica (INEGI
or National Institute of Statistics, Geography and Information) and the Registro Agrario
Nacional (RAN or National Agrarian Registry). Each of these institutions plays a specific
role in different parts of what the government portrays as a series of ten steps.
Among these ten steps are three required meetings of the ejido assembly. This
process of privatization requires different levels of participation at each incremental step:
Ejidatarios can obtain individual certificates of title to their land parcels if
their ejido agrees to participate in.. (PROCEDE). Participation in the
titling program requires an initial meeting of the ejido assembly, attended
by half of the ejido members, plus one, to call for a vote for or against
joining PROCEDE. At a second meeting to take the vote, there is no legal
quorum of ejido members. A collective decision to participate in the land-
titling program may or may not lead to a future decision to privatize or
disband the ejido, which can happen only at the end of the titling process.
(Cornelius and Myhre 1998:2-3)
Initial involvement with PROCEDE does not necessarily lead to eventual land
certification. Furthermore, completion of PROCEDE only makes it possible to
subsequently privatize the land. Ejidatarios may exchange their land certificates for land
titles with the approval of the ejido assembly (Stephen 1994:6). At each step along this
process of titling, delays caused by institutional influences are possible. Indeed, difficulties
concertation (the process of coming to an agreement or compromise); 4. Information
and consent assembly; 5. Works of the auxiliary commission, PA and INEGI; 6. Informing
assembly of the auxiliary commission; 7. Measuring and the generation of maps; 8.
Assembly delimiting, designating and assigning lands; 9. Inscription of acts and plans; 10.
Delivery of documents to the beneficiaries.


215
rather than capacity as a criterion for promotion, thereby slowing productivity (de la Cruz
1995:16-17). These examples of the impact of state labor institutions reveal the variety of
ways in which they hinder the implementation of neoliberal reforms.
Chapter 6 revealed the impact of state institutions in the agrarian sector on the
reforms. The most significant state institution under study in the agrarian sector was the
ejido, which historically provided a myriad of benefits to ejidatarios and now sharply limits
neoliberal reforms in the agrarian sector. Many ejidatarios are not interested in completing
PROCEDE, the governments land titling process, because of the values they place on
continued ejido membership (Goldring 1998:169; Jones and Ward 1998:254; Lpez Sierra
and Moguel 1998:223; Stephen 1998:126). PROCEDE was supposed to be complete by
the end of 1994, yet five years after that date, the process is only two-thirds complete, is
decelerating and may even stop completely.
Informal state-society institutions governing relations in the agrarian sector also
limit the impact of neoliberal reforms. For example, traditional forms of political
manipulation and the bolstering of corporatist ties during the PROCEDE land titling
process continue (Jones and Ward 1998; Zendejas and Mummert 1998). Both the formal
institution of the ejido and the informal norms governing interactions with ejidatarios
reduce the magnitude of reforms.
Other significant state institutions relevant to this examination included the
National Peasant Confederation (the CNC), the National Federation of Organizations and
Citizens (the FNOC) and the Mexican Social Security Institute (the IMSS). Even during
the mid-1990s, the CNC and the FNOC guaranteed loans to sugar cane growers, despite
the fact that one neoliberal goal was the conversion of cane growers to the production of


137
of 1910-1917. The new middle sectors led the organization of the corporatist system and
helped establish a radical populist alliance between the three traditional sectors and the
governing Mexican regime (Collier 1992:11). In 1910, 195,000 workers made up the
labor sector, whereas 11 million peasants and rural workers made up the peasant sector
(Brachet-Marquez 1994:46). Yet the significance of labor relative to the peasant sector
should not be underestimated, despite the large difference in the size of each Of the three
incorporated sectors of the PRI, labor sector has been the strongest and best organized for
collective political action (Cornelius 1996:82).
Although the relationship with labor has been institutionalized for more than eight
decades, the relative power of labor relative to the regime has historically wavered. In the
initial years of the Mexican corporatist system, labor was sometimes able to receive
concessions from the government at the expense of other important groups ^ These
other groups formed a counter-reform alliance that provided a firm challenge to the
position of labor (Collier 1992:12). As a result, the power of labor varied substantially
during the first half of the 20th century, alternating between offensive and defensive
positions relative to the state.
Corporatist incorporation during the early 20th century took place in three phases:
a cautious phase from 1917-1920, and two populist phases, during the 1920s and under
Crdenas in the 1930s (Collier 1992:14). In the first populist period, for example,
presidential candidate Alvaro Obregn signed a secret pact with the major labor
confederation (the Confederacin Regional Obrera Mexicana, or CROM), granting
These other groups included United States interests, national capital, the peasant sector
and the Catholic Church (Collier 1992:17).


255
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166
In order to demonstrate his commitment to modernizing the Mexican countryside,
President Salinas de Gortari proposed a number of reforms that were a policy compromise
between modernizing technocrats and the campesinista (peasant) factions (Cornelius and
Mhyre 1998:4-7). The modernizing technocrats sought to increase the export potential
of those sectors of agriculture where Mexico has comparative advantages, and whose
opportunities would be expanded under ...(NAFTA) (Cornelius and Mhyre 1998:5).
Peasant factions sought to retain privileges for the sector. On November 7, 1991, as
NAFTA negotiations continued, Salinas announced a proposal to amend Article 27 of the
Mexican Constitution, thereby making it possible to privatize ejido land. The package of
reforms that resulted includes three elements:
The reform of Article 27 is a generic term to describe three related pieces
of legislation. These are the new Article 27 of the Mexican Constitution
(Diario Oficial, 6 January 1992), the new Agrarian Law (Diario Oficial,
26 February 1992, hereafter Ley Agraria) and the new Agrarian Law
Regulations {Diario Oficial, 6 January 1993, Reglamento de la Ley
Agraria en Materia de Certificacin de Derechos Ejidales y Titulacin de
Solares...). (Jones 1996:189, italics added)
This set of reforms has been called the most farreaching institutional change for
rural Mexico since the Revolution (DeWalt and Rees 1994:1). The debate and discussion
these reforms generated, both among scholars internationally and in the Mexican
countryside, was enormous, and their expected impact was profound. Two prominent
scholars postulate, for example,
Both because of the great size of the ejido sector.. .and because of the
close relationship that often exists in practice between ejidos and private
farms, the reforms of Article 27 may have a more far-reaching and
enduring impact than any other of the economic reforms introduced in
Mexico by technocratic governments since 1982. (Cornelius and Myhre
1998:1)


They have happily done far more than most parents would ever attempt. 1 am grateful to
my Grandmother, Emma Just, to whom this work is dedicated, for her constant
encouragement of my intellectual development and my interest in international issues.
Special thanks are also due to my boss, Dr. Joel B. Cohen, for his willingness to
accommodate my academic schedule and deadlines over the years. I am also extremely
grateful to the Lola Cruz and the entire Santoyo-Cruz family for letting me get to know
Mexico from within their remarkable household. Without their generosity and
benevolence, I would never have come to care so deeply about Mexico, nor struggled so
hard to understand it. Last but certainly not least, I would like to thank my fianc, Faure
Joel Malo de Molina Faxas, for his unending encouragement and loving support during
many long hours of work.
v


124
remain significant during the implementation of neoliberal reforms, and these pacts are
refreshed by the rhetoric of social liberalism in Mexico.
One way to examine whether neoliberal reforms are successfully transforming the
populist state is to examine the transformation of institutionalized corporatist and
clientelist policies. Given the significant historical impact of corporatist and clientelist
institutions on the political economy of Mexico, one would expect a package of neoliberal
reforms to attempt to curtail their impact, since such institutions are considered strong
hindrances to the efficient and democratic operation of political and economic systems.
Neoliberal reforms aim not only to alter formal institutions of the state, but also to
eradicate the corporatist and clientelist informal operating procedures in Mexico and other
Latin American states. As de la Garza argues, Neoliberalism and corporatism appear in
theory to be mutually exclusive (de la Garza 1994:199). How extensive has the
reduction of corporatist and clientelist institutions been?
Declining Corporatism and Clientelisin?
This section will demonstrate a variety of ways that corporatist and clientelist
institutions hinder and distort the impacts of neoliberal reforms. Corporatism and
clientelism are not fading away as a result of neoliberal reforms, although some scholars
have predicted their demise (e g., Teichman 1996; Tornell 1995). Neoliberal policies may
not force the dissolution of patronage systems. Indeed, some neoliberal policies might
actually strengthen older (and often corrupt) informal institutions of the state (Tornell
1995:70). Since neoliberal policies have been and are being adapted at different times, not


62
assistance would not be tied to partisan or clientelistic relations with certain sectors or
firms. Neoliberal views were prominent in the United States government, the U.S. Federal
Reserve Board, and the IMF and the World Bank (Nazmi 1996:5).
Neoliberal ideals were embodied in what became known as the Washington
Consensus. 12 The Washington Consensus was formally identified following a 1990
conference sponsored by the Institute for International Economics in Washington, DC.
The conference gathered together a group of Latin American and Caribbean (LAC)
policy-makers, representatives of international agencies, and members of academic and
think-tank communities (Burki and Perry 1998:1). In response to development needs at
the time, Washington had reached consensus on the following policy instruments: (1)
fiscal discipline; (2) public expenditure priorities; (3) tax reform; (4) financial
liberalization; (5) free exchange rates; (6) trade liberalization; (7) direct foreign
investment; (8) privatization; (9) deregulation; and (10) property rights (Williamson
1990). These ten recommendations are sometimes referred to as the ten commandments
(Nazmi 1996:6).
To what extent did these neoliberals underemphasize the significance of
institutions? With the perspective of around a decade of policy reforms according to
neoliberal (Washington Consensus) ideals, two World Bank discussion papers^ conclude
12 Economist Nazmi also uses the Washington Consensus to identify neoliberal policy
recommendations (Nazmi 1996:5).
13 See Shahid Javed Burki and Guillermo E. Perry, (1998) Beyond the Washington
Consensus: Institutions Matter. Washington, DC: World Bank, Latin American and
Caribbean Studies Viewpoints Series; and Shahid Javed Burki and Guillermo E. Perry,
(1997) The Long March: A Reform Agenda for Latin America and the Caribbean in the


245
Keman, Hans. 1998. Political Institutions and Public Governance, in Roland Czada,
Adrienne Hritier and Hans Keman, eds., Institutions and Political Choice: On the
Limits of Rationality. Amsterdam: VU University Press.
Kettl, Donald F. 1993. Public Administration. The State of the Field, in Ada W. Finifter,
ed., Political Science: The State of the Discipline. Washington, DC: The American
Political Science Association.
Klein, Philip A. 1994 [1980], Confronting Power in Economics: A Pragmatic
Evaluation, in Beyond Dissent: Essays in Institutional Economics. Armonk, N.Y.
and London, England: M.E. Sharpe.
Klein, Philip A. 1994. Bevond Dissent: Essays in Institutional Economics. Armonk, N.Y.
and London, England: M E. Sharpe.
Klesner, Joseph L. 1996. Broadening toward Democracy? in Laura Randall, ed.. 1996.
Changing Structure of Mexico: Political. Social, and Economic Prospects.
Armonk, NY: M E. Sharpe.
Knight, Alan. 1986. The Mexican Revolution. Vols. 1 and 2, Cambridge: Cambridge
University Press.
1993. State Power and Political Stability in Mexico, in Neil Harvey, ed.,
Mexico: Dilemmas of Transition. London and New York: The Institute of Latin
American Studies, University of London and British Academic Press.
1996a. Corruption in Twentieth Century Mexico, in Walter Little and
Eduardo Posada-Carb, eds., Political Corruption in Europe and Latin America.
New York: St. Martins Press, Inc..
1996b. Salinas and Social Liberalism in Historical Context, in Rob Aitken,
Nikki Craske, Gareth A. Jones and David E. Stansfield, eds., Dismantling the
Mexican State?. London: Macmillan Press and New York: St. Martins Press.
Knoke, David. 1990. Political Networks: The Structural Perspective. Cambridge:
Cambridge University Press.
Koeble, Thomas A. 1995. The New Institutionalism in Political Science and Sociology
(Review Article), Comparative Politics. (January) 231-243.
Krasner, Stephen D. 1984. Approaches to the State: Alternative Conceptions and
Historical Dynamics, Comparative Politics. (January) 16: 223-246.
La Botz, Dan. 1998. Reform, Resistance, and Rebellion Among Mexican Workers,
Borderlines. 48, Vol. 6 (7), September, 6+


114
institutions may serve as forces that retain traditional positions of privilege for parts of the
private sector.
This project focuses instead on state institutions in labor and agrarian sectors. The
decision to focus on these was made specifically because of their traditional historical
positions in the PRI/state. Neoliberal reforms aimed to weaken the power of these
traditional sectors. Since their positions have been far more stable (although they have
gradually been losing strength) than those of state-private sector institutions, labor and
agrarian institutions provide better insights into the ways that state institutions impact the
implementation of neoliberal reforms.


256
Swedberg, Richard. 1998. Max Weber and the Idea of Economic Sociology. Princeton:
Princeton University Press.
and Mark Granovetter 1992. Introduction, in Mark Granovetter and
Richard Swedberg, eds., The Sociology of Economic Life. Boulder: Westview
Press.
Tannenbaum, Frank. 1964. Introduction, in Frank Brandenburgs The Making of
Modem Mexico. Englewood Cliffs, N.J., Prentice-Hall.
1966 [1933], Peace by Revolution: Mexico after 1910. New York:
Columbia University Press.
Taylor, Lance and Ute Pieper. 1996. Reconciling Economic Reform and Sustainable
Human Development: Social Consequences of Neo-Liberalism. United Nations
Development Programme, Office of Development Studies, Discussion Paper
Series, 2.
Teichman, Judith. 1996. Economic Restructuring, State-Labor Relations, and the
Transformation of Mexican Corporatism, in Gerardo Otero, ed., Neo-liberalism
Revisited: Economic Restructuring and Mexicos Political Future. Boulder:
Westview Press.
Teitel, Simn, ed. 1992. Towards a New Development Strategy for Latin America
Washington, D C.: Inter-American Development Bank.
Thelen, Kathleen and Sven Steinmo. 1992. Historical Institutionalism in Comparative S'
Politics, in Sven Steinmo, Kathleen Thelen, and Frank Longstreth, eds.
Structuring Politics: Historical Institutionalism in Comparative Analysis.
Cambridge: Cambridge University Press.
Thiesenhusen, William C. 1995. Broken Promises: Agrarian Reform and the Latin
American Campesino. Boulder, CO: Westview Press.
1996. Mexican Land Reform, 1934-91. Success or Failure? in Laura
Randall, ed., Reforming Mexicos Agrarian Reform. Armonk, NY: M E. Sharpe.
Tokman, Vctor E. 1993. Labor Markets and Employment in Latin American Economic
Thinking, in Osvaldo Sunkel, ed., Development from Within: Toward a
Neostructuralist Approach for Latin America. Boulder and London: Lynne Rienner
Publishers.
Tool, Marc R. 1994. Foreward, in Philip A. Klein, Beyond Dissent: Essays in
Institutional Economics. Armonk, N Y. and London, England: M.E. Sharpe.


178
29 percent of the total number of agrarian groups, and represents a large part of the
11,326 uncertified groups. Why do agrarian groups not complete PROCEDE? The
impact of the ejido itself provides a great part of the answer.
Approximately one-third of the ejidos with problems with PROCEDE (a total of
2,579 ejidos or 32.8% of ejidos having problems) have rejected PROCEDE outright.33
Many of these ejidatarios reject PROCEDE because of the historical role of the ejido.
Ejido membership is desirable to both ejidatarios and ejido leaders:
Privatization would bring an end to many of the meanings and benefits
associated with ejido rights and membership. Ejidatarios would lose an
element of their history and identity, their tax-free status, lot distributions,
and dividends... Perhaps more importantly, leaders or aspiring leaders
would lose important opportunities for personal enrichment, mobility, and
power. (Goldring 1998:169)
Ejidatarios and ejido leaders benefit both directly and indirectly from their historical
relationships with the Mexican state. Many ejidatarios reject the neoliberal PROCEDE
privatization plan because of these institutionalized benefits of ejido membership.
The benefits of ejido membership may by highlighted by distinguishing between
ejidos and property owning communities. Even in communities that share physical
characteristics, sharp contrasts exist between community ideologies (Brown 1997:104).
For example, in one typical community of property owning individuals, the ideology is
entrepreneurial, and its residents categorize themselves into three classes of people,
whereas in one typical ejido, the ideology is egalitarian, and its residents explain that they
are all poor peasants (Brown 1997:107). Greater community solidarity and fewer
social problems characterized the ejidal community when compared to the community of
33 Secretara de la Reforma Agraria (1998:109) using data from the Procuradura
Agraria.


198
Two of these new state institutions are PRONASOL and PROCAMPO, the stars
of rural neopopulism and the artifices of the client culture in times of neoliberal
reform (Bartra 1996:174). How did these two programs created to smooth neoliberal
reforms end up in fact perpetuating populist and corporatist institutions? A closer
examination of each one in practice will reveal the answer to this question and suggest
the long-term consequences of these influences.
PRONASOL
PRONASOL was an ambitious anti-poverty program designed to ease the
transition into a neoliberal economy. It was created on December 6, 1988 and was
intended to benefit the poorest regions of Mexico. Its federal budget line, Ramo 0026
(Branch 0026), was previously allocated to programs called Desarrollo Regional'
(Regional Development). In 1997, Ramo 0026 funds became known as Superacin de
la Pobreza (roughly, Overcoming Poverty), and as Desarrollo Social y Productivo
en Regiones de Pobreza (Social and Productive Development in Regions of Poverty)
in 1998.
PRONASOL (or Solidarity, as it was often called) was a very visible program.
The program was highly publicized as a means for organized community groups to
receive federal investment. Its high visibility did not accurately reflect its proportion of
federal investment, however, since even during 1993 (its biggest year), PRONASOL
represented no more than 15 percent of total federal investment (the other 85 percent
belonging to the normal federal investment program (Rodriguez 1997:102).
the shadow of a bureaucracy that may bestow or deny; an omnipresent
power that may reward or punish but always corrupts. (Bartra 1996:174)


11
many informal institutions also govern interactions on ejidos and among ejidatarios
(members of ejidos).
Formal institutions of the public sector and informal institutions such as cultural
norms frequently share similar roots. Social interactions (informal institutions) often
become routine at the same time that formal institutions settle into the provision of
services. Both informal and formal institutions may influence the same transactions.
Informal patterns may be as important as or even more important than formal
organizations, and they often account for the discontinuity between proclaimed policy
goals and actual policies in practice. This is especially true in many areas of Latin
America, since informally institutionalized interactions are common in the region and
frequently of substantial significance.
Theoretical and Methodological Approach
In Chapter 2 a number of different theoretical approaches to the study of
institutions are reviewed. Ultimately, a historical institutionalist perspective is chosen
because it provides the most explanatory power, but the institutional analysis is also linked
to micro- and macro-level approaches. Historical institutionalists argue that institutions
have a significant effect on their environment. Institutions shape the thoughts, behaviors
and choices of individuals, as well as limiting the range of and speed of possible
environmental changes. The use of a historical institutionalist approach provides a way to
study the impact of large state institutions over time. Using this approach it is possible to
study subnational processes, structures and routines that transcend, outlive and therefore


187
The state continues to play a role in ejido affairs, and the reforms are not as
radical as they at first may appear. Political protection and other forms of clientelist
patronage continue unabated despite the reforms:
Indeed, for the most part the agrarian legislation continues to offer
political protection to the ejido... [T]he legislation [has not] set out
deliberately to undermine... benefits such as access to subsidies and
marketing networks, mechanisms for the resolution of boundary conflicts,
opportunities for the gift of plots to family members, or assistance in the
organization of companies to run gas stations, quarries, and taxi services
and to sell water and building materials to low-income settlements...
Many of the apparently profound reforms are largely cosmetic or subtle
definitions. . The reform, therefore, is not as radical as it first appears, and
this fact should warn against talking it up as a giant departure along a
neoliberal road toward full privatization. (Jones and Ward 1998:253-254)
An understanding of the limits of the reforms is noteworthy when contrasted with
the stated intent of the neoliberal reforms and their anticipated effects. Even deeper
deviations from the behavior expected of a neoliberal state are evident. Ejidal
organizations are now even being revived (Secretara de Reforma Agraria (1998:104-
105). New mechanisms of political manipulation perpetuate the historical intervention by
the state in ejidal affairs:
Indeed, on the back of the reforms has come a host of secondary
legislation, regulations, and codes that establish a series of restrictions,
procedures, and normative conditions for the application of the new
reforms. In applying these procedures the state has obtained for itself a
series of mechanisms to intervene in the ejido... Certainly the evidence
from Puebla suggests that in the short term the ejidatarios risk losing out
less on account of any so-called privatization than of the accompanying
political manipulation. (Jones and Ward 1998:272)
These new mechanisms of manipulation are examples of the rebirth of older
informal institutions into new procedures that maintain prior relations between ejidatarios
state intervention and corporatism. (Jones and Ward 1998:253, citing
Jones 1996)


87
The connection between Revolutionary goals and Article 27 of the Constitution is
frequently articulated. Article 27 was the institutional response to the demands ofTierra
y Libertad (Land and Liberty) shouted on the battlefields by peasant insurgents during the
Mexican Revolution (DeWalt and Rees 1994:1). The ejido thus embodied the ideals of
the Revolution in a way that touched the lives of many of the poorest citizens of Mexico.
The impact of the institution of the ejido on agrarian life and rural development
throughout the post-Revolutionary period will be examined in detail in Chapter 6.
The third aspect of social justice described above, labor rights, was also formally
institutionalized in Section 6 of Article 123 (Brachet-Marquez 1994:56). However,
Article 123 merely gave legal status to the conquests achieved through the struggles that
had taken place over the years among workers, the state, and capitalists (Brachet-Marquez
1994: 57). In fact, the Constitution laid foundations that eventually restricted the ability of
labor to achieve further advances (Brachet-Marquez 1994:57).
In sum, the Revolutionary ideals ofMexicanism and social justice had both
informal and formal institutional manifestations, as introduced briefly above. The impact
of these formal and informal Revolutionary institutions on the implementation of neoliberal
reforms in Mexico is discussed in chapters 5 and 6. Also important to the analysis in the
next two chapters is an understanding of the relationship between the Partido
Revolucionario Institucional (Party of the Institutionalized Revolution or PRI) and the
state, an understanding of the linkages between historical Mexican corporatism,7
7 Corporatism is a form of sociopolitical organization. Nikki Craske explains that, The
principle characteristic of corporatism is the vertical, hierarchical and functionally
differentiated organisations which separates potential allies (Craske 1996:80).


18
political, economic and social phenomena, whereas behavioralist / utilitarian approaches
are micro-level, and social determinist / Marxist approaches are macro-level. Although an
institutional approach is adopted here (as explained below), some linkages to the insights
of micro- and macro-level scholarship are made as well.
Within the field of political science, analyses of institutions dominated research at
the end of the 19th century and beginning of the 20th century. This old institutionalism
focused on constitutions and formal institutions of government, yet considered them to be
dependent, not independent, political variables. 1 The current renewal of interest in
institutions developed in reaction to the behavioralist revolution of the 1950s and 1960s
(Scott 1995:7). Behavioralist research focused on observable individual behavior, and
used this observed behavior to explain government. The institutionalist approach is
selected here because behavioral assumptions have the following weaknesses: (1) the
assumption that political behavior reveals preferences, (2) the assumption that the
aggregation of interests is efficient and unproblematic, and (3) the normative assumption
that institutions are therefore unbiased and just; social determinist approaches, on the
other hand, are repudiated for assuming that interests are objective and social class /group
based (Immergut 1998:6-8, 12).
This framework serves to distinguish institutional approaches from other types of
research in the social sciences, but reveals little about the diversity of institutional
approaches themselves, including rational choice, branches of organization theory
(sociological institutionalism) and historical institutionalism. This analysis will rely upon
1 See Eckstein (1963).


CHAPTER 6
THE INSTITUTIONAL INFLUENCE ON NEOLIBERAL REFORMS IN THE
AGRARIAN SECTOR
The previous chapter revealed a number of ways that state institutions influence
the implementation of neoliberal reforms. This chapter adds to that body of evidence by
focusing on the agrarian sector in particular. The agrarian sector has historically been very
significant in Mexico. In 1921, 9.9 million of Mexicos 14,335,000 inhabitants lived in
localities with less than 2,500 residents. This represented 68.8 percent of the population.
By 1995, only 26.5 percent of the population lived in such rural areas, yet the total number
of rural inhabitants had grown to 24.2 million. 2 Thus, although the agrarian sector has
declined in significance relative to urban sectors, it remains a very large and important part
of Mexican society. As noted in Chapter 4, the peasant sector has historically been
incorporated into the ruling regime, although its influence has declined in recent years.
Of the state institutions affecting the agrarian sector, none has been more
significant than the ejido. As explained below, the ejido system prevented the private
ownership idealized under neoliberalism, and as such, it has been the target of neoliberal
reforms in the agrarian sector. Reforming the ejidal sector was undertaken in an effort to
1 Secretara de ¡a Reforma Agraria (1998:120) citing the IV Censo General de Poblacin
(Fourth General Population Census).
2 Secretara de la Reforma Agraria (1998:121 -122), citing the IV Censo General de
Poblacin.
153


Copyright 1999
by
Diane Just


73
...the replacement of the state-centric model with an alternative matrix
organized around market logic is still far from complete even in those cases
where the process has advanced most decisively, as in Chile, and to a lesser
extent, in Argentina and Mexico. In any event, the change should be seen
as consisting of overlapping elements of decline (linked to the
disorganization of the state-centric matrix), on the one hand, and of
elements of creation related to the reorganization of social behavior on the
basis of a different set of principles, on the other. (Cavarozzi 1994:129)
This more mixed outcome better characterizes the new political economy of Latin
America than a more purely neoliberal label.
Dornbusch and Edwards (1995) similarly determine that neoliberal reforms are not
showing the anticipated results. They reveal, for example, that, Even though structural
reforms appear to be a necessary condition for growth, they are not a sufficient
one(Dornbusch and Edwards, 1995:1). Dornbusch and Edwards reach this conclusion
after examining evidence that in some countries, such as Bolivia, growth has continued to
be shy even years after the completion of the basic adjustment program (Dornbusch and
Edwards 1995:1). To investigate the cause of this slow growth, scholars should examine
more closely the effects of both formal and informal institutions on the implementation of
neoliberal reforms. One important reason why structural reforms do not always lead to
their desired effects is that informal institutions play a role in hindering successful
implementation. The process of reform does achieve its full potential as a result.
Ramn O. Frediani supplies a useful analysis of the comparative success of
neoliberal reforms in Latin America. His study, Planes de Estabilizacin y Reforma
Estructural en Amrica Latina: Una Sntesis (Stabilization Plans and Structural Reform in
Latin America: A Synthesis] 1996), ranks eight Latin American countries on their success
at achieving the stabilization and structural reform objectives pursued through November


22
Rational Choice
Rational choice or rational expectations approaches view institutions as the results
of conscious designs by rational individuals. Rational choice in political science is formal
theory first borrowed from work in economics on rational expectations (Lalman,
Oppenheimer and Swistak 1993:77). These assumptions are that all persons are rational
maximizers of self-interest, calculating the value of alternative goals and acting efficiently
to obtain what they want (Zuckerman 1991:45). A rational actor may be defined as an
actor making optimal choices in specified environments (Nurmi 1998:15). One
problematic aspect of this is that the boundaries of those environments for one person may
differ vastly from the boundaries of another, which means their choices may differ
significantly. A brief summary will clarify the different perceptions of the role of
institutions in the field of economics, and how the concept of rational choice changed
research in other fields.
Rational choice and institutions in neoclassical economics, neoliberalism and the
new institutional economics
Research utilizing a rational choice approach is extremely diverse, ranging from
free market conservatives to Marxists (Hauptmann 1996:1). The use of rational choice
originated in economics in response to the shortcomings of the (traditional) neoclassical
economics paradigm, as a basis for the New Institutional Economics (NIE) (Nabli and
Nugent 1989:1333). Neoclassical economics generally took the institutional framework as
a given, and in many cases ignored it altogether (Nabli and Nugent 1989:1335). In
reaction to this, an institutionalist school developed, creating a rough distinction between


72
1996).18 This institutional context includes both historical traditions (informal
institutions) and the role of the state (formal institutions).
Grindle (1996) examines in detail the cases of Mexico and Kenya. She explains
that, ultimately, the problems of effective delivery of social services and physical
infrastructure reflect the training, motivation, and organization of public officials in large
bureaucracies... (Grindle 1996:128). Her work provides support for the notion that the
role of the state in the 1990s depends to a large extent upon its historical
institutionalization and a capable technocratic elite backed by political power of reformist
orientation. Thus the implementation of neoliberal reforms depends heavily on national
institutional heritage.
There are many discrepancies between the predicted and actual outcomes of
neoliberal policies. With the hindsight of the mid-1990s, scholars such as Burki and
Edwards (1996a and 1996b), Cavarozzi (1994), Dornbusch and Edwards (1995), Frediani
(1996) and Manzetti (1994) draw conclusions similar to those of Graham (1990) and
Grindle (1996). For example, Cavarozzi argues that the reduction of the role of the state
in Latin America is somewhat misstated:
l8 Grindle explains that the 1980s and early 1990s were a time which,
...encouraged critical rethinking about appropriate functions of the state.
...Economists debated what the state ought to do in terms of definitions of
public goods, market failures, and the comparative advantages of states and
markets, while others considered what functions were central to the social
contract between state and society. In practice, of course, theoretical
debates about what the state ought to be responsible for were adjusted to
the historical traditions of specific countries, the economic and political
strength and composition of the private sector in each country, and the
political convenience of destatization in individual countries. (Grindle
1996:128)


133
corporatist nature of the PSE and the subsequent economic pacts which followed is
unmistakable.
The decision by the government to use the pacts to achieve its goals is intriguing,
since it reveals the use of corporatist (rather than purely liberal) means to ease the
implementation of neoliberal reforms such as fiscal adjustment, privatization and trade
liberalization. The lack of a coherent plan since 1982 had contributed to economic
troubles. When the decision to use a pact was realized, the 1988 economic forecast was
grim, predicting,
135 percent inflation (the highest since the Revolution) and a public deficit
of 18.5 percent of GDP (Whitehead, 1989:183). Since 1982, experts in the
financial sector had been disagreeing on the best remedy for the economic
crisis: shock or no shock, exchange control or no exchange control, and so
on. (Brachet-Marquez 1994:158)
The PSE was renewed four times in 1988. This formal economic pact was the
model for subsequent tripartite pacts, known as the PECEthe Pact for Economic
Stability and Growthduring later years (after 1989). The pacts were bolstered by a
monitoring mechanism (a commission.. .of high-ranking officials from the government
itself and representatives from labor, agriculture and business) that kept policymakers
informed of the performance of the participants in the pact (Lustig 1998:54). Since the
pacts retained corporatist features, they contradicted certain elements of neoliberal reform
packages while simultaneously advancing other aspects of them. The distinctive character
of the pacts is highlighted by the fact that they were set up without the help of the
implementing an incomes policy easier than in other countries. Its
corporatist character provided the government with adequate interlocutors
to implement such a policy... (Lustig 1998:52)


83
The Institutional Heritage of the Mexican Revolution
Volumes have been written about the causes and consequences of the Mexican
Revolution.^ Scholarship on the Revolution may be grouped into orthodox and revisionist
literatures. Orthodox works common until the 1970s and 1980s describe the Revolution
as a successful social uprising that benefited the peasantry.^ Revisionist scholars, on the
other hand, describe the Revolution as a power struggle among elites that did little to alter
the fate of the masses. ^ Joseph and Nugent (1994a) suggest a postrevisionist synthesis of
orthodox and revisionist approaches. A postrevisionist approach attempts to mesh top-
down analysis with bottom-up analysis to better portray the complexity of interactions
between elites, popular groups and institutions. This type of analysis provides a more
balanced summary of the Revolution than either orthodox or revisionist scholarship.
The Revolution was fought by citizens with differing motives and varied
aspirations for the future of the state. Citizens grievances included disdain for policies
privileging foreigners, unhappiness with electoral fraud and unlimited presidential
reelections and disputes over economic policies that impoverished huge sectors of
peasants and workers. The variety of revolutionary groups, the history of the Revolution
See, e g., Gilly 1983; Hart 1987; Knight 1986; Womack 1969. For summaries, see
Roderic Ai Camp 1993, Chapter 2: Political-Historical Roots: The Impact of Time and
Place. For a more detailed examination, see Brandenburg 1964, Chapter 3, Fifty Years
of Revolution (1).
4 See, e.g., Brenner 1971 [ 1943], Tannenbaum 1966 [1933],
5 Purnell (1999) makes this point. Examples of revisionist scholarship are works by Ruiz
(1980) and Womack (1991).


70
smaller parallel literature challenges these claims. In an early example of this perspective,
Graham reviews the history of the growth of the Latin American state and the origins of
pressure to reduce the size of the public sector, to limit public expenditures, and to
improve performance (Graham 1990:17). He concludes, however, that, concrete results
to date [1990] in the implementation of these policy priorities have been... meager...
(Graham 1990:17). He argues that by 1990 only Chile, and to a much lesser extent,
Mexico had implemented privatization policies. Instead, he describes the policy dilemmas
in the region:
,..[F]or example in Brazil, Mexico, and Peru...stasis also abounds.... [T]he
size of national indebtedness and the international pressures to continue to
service that debt have placed all governments in the region under
tremendous pressure. In such a setting, while policy alternatives continue
to be discussed, there has yet to be constructive dialogue around the issue
of how to arrive at policies that can respond to the needs of the
international financial community, can be defended internally and publicly,
and can mediate effectively between internal and external pressures.
(Graham 1990: 18)
During this period of uncertainty and international pressures, the development
policies implemented throughout Latin America were characterized by a high degree of
variation both among and within individual states. Yet as the 1990s progressed, the
selection of national development policies became more homogenous throughout Latin
America, and even globally, as neoliberalism gained in popularity. The pressures to
reform the state sector grew stronger.
Since international financial institutions make the availability of loans dependent
upon the acceptance of neoliberal development policies, governments resort to the use of
a variety of methods to demonstrate that their public agendas comply with these
requirements. Maneuvering at the national and subnational levels is used to address


117
across-the-board). Neoliberal reforms were not always promoted or upheld, and a
significant discrepancy exists between the rhetoric of reform and their actual progress.
Institutional factors influenced both the direction and the pace of these reforms, leading to
unexpected outcomes.
Mexico has had a public agenda as well as a different, hidden agenda for its
national politics over many decades (Knight 1996a; Romanucci-Ross 1986). A gap exists
between constitutional principle and daily practice, with the 1917 Constitution serving as
the public transcript and the actual daily practice of politics expressing the hidden agenda
(Knight 1996a). An example of this is the concealing from the public of the true state of
the economy, especially at the end of a sexenio, keeping public tensions artificially low
even during difficult economic times. This has occurred historically, with extreme
instances found at the end of the Salinas de Gortari presidency in 1993-1994. Since at
least the 1920s, reformers of the state have sought to compel politicians to live up to their
public transcript (Knight 1996:224).
The double agenda has been played out most transparently at the national level
during most of the 20th century. A similar double agenda now also exists between the
national and international levels, with a public agenda being presented to international
observers and financiers, while a hidden agenda reflects more nationalistic political goals.
Since this type of politics (characterized by both a public and a hidden agenda) has been
common at the national level for more than half a century, it enjoys a level of tolerance
within Mexico. The double agenda hinders the impact of neoliberal reforms, but is used to
bolster the ruling regime.


239
1982. The Rules of Sociological Method, (edited, with an introduction, by
Steven Lukes; translated by W D. Halls), 1st American ed., New York: Free Press.
Dutt, Swarna D. and Dipak Ghosh. 1996. The Export Growth-Economic Growth Nexus:
A Causality Analysis, Journal of Developing Areas. 30 (January) 167-182.
Eckstein, Harry. 1963. A Perspective on Comparative Politics, Past and Present, in
Harry Eckstein and David Apter, eds., Comparative Politics: A Reader. New
York: Free Press of Glencoe, pp3-32.
Economist. December 20, 1997. Land Reform Reformed: Nicaragua, 345:31-32.
Edwards, Sebastian. 1995. Crisis and Reform in Latin America: From Despair to Hope.
New York: Oxford University Press.
Enciso, Anglica. 1998 Descapitalizados y Sin Apoyo, Productores de Maz Viven la
Peor Crisis de la Historia, La Jornada. December 20.
1997. Se canalizarn este ao 7 mil 533 millones de pesos mediante el
plan de apoyos directos en la materia, La Jornada. August 11.
Enriquez, Laura. 1997. Agrarian Reform and Class Consciousness in Nicaragua,
Gainesville: University Press of Florida
Erfani, Julie A 1995. The Paradox of the Mexican State: Rereading Sovereignty from
Independence to NAFTA. Boulder: Lynne Rienner Publishers.
Esfahani, Hadi Salehi. 1994. Lessons from the Political Economy of Privatization and
Public Sector Reform in the Middle East and Southeast Asia, The Quarterly
Review of Economics and Finance. 34, Special Issue, (Summer):301-331
Ethington, Philip J. and Eileen L McDonagh. 1995. The Common Space of Social
Science Inquiry, Polity. 28 (1) 85-90.
Fanelli, Jos Maria, Roberto Frenkel and Lance Taylor. 1994. Is the Market-Friendly
Approach Friendly to Development? in Graham Bird and Ann Helwege, eds.,
Latin Americas Economic Future. San Diego, CA: Academic Press.
Fernndez Jilberto, Alex E. and Barbara Hogenboom 1996. Mexicos Integration in
NAFTA: Neoliberal Restructuring and Changing Political Alliances, in Alex E.
Fernndez Jilberto and Andr Mommen, eds., Liberalization in the Developing
World: Institutional and Economic Changes in Latin America. Africa and Asia.
London and New York: Routledge


I certify that I have read this study and that in my opinion it conforms to
acceptable standards of scholarly presentation and is fully adequate, in scope and quality,
as a dissertation for the degree of Doctor of Philosophy.
&
4-/S
Philip JMVflnams, Chairman
Associate Professor of Political Science
I certify that I have read this study and that in my
acceptable standards of scholarly presentation and is fuli
as a dissertation for the degree of Doctor of Philosoph;
on it conforr
uate, in
quality,
Goran Hyden
Professor of Political S
I certify that I have read this study and that in my opinion it conforms to
acceptable standards of scholarly presentation and is fully adequate, in scope and quality,
as a dissertation for the degree of Doctor of Philosophy.

M. Leann Brown
Associate Professor of Political Science
I certify that I have read this study and that in my opinion it conforms to
acceptable standards of scholarly presentation and is fully adequate, in scope and quality,
as a dissertation for the degree of Doctor of Philosophy.
Science
lichael Chege
Associate Professor of Polft
I certify that I have read this study and that in my opinion it conforms to
acceptable standards of scholarly presentation and is fully adequat^n scope and quality,
as a dissertation for the degree of Doctor of Philosophy.
Clyde Kiker
Professor of Food and Resource
Economics


92
Yet as the New York Times reports, the potential for the PRI to win the 2000 presidential
election depends once again largely upon internal political strategies of the PRI, rather
than challenges from outside the party:
Polls suggest that the party can win the presidential election next year, too,
but only if the party can avoid a damaging split. As a result, the way the
party selects its candidate is crucial, because powerful politicians seeking
the nomination could bolt the party if they feel mistreated, several analysts
said. (Dillon 1999b)
In recent years the PRI has made efforts to democratize candidate selection and reduce
electoral fraud, as discussed below in the section on the sexenio. These reforms may also
be viewed as part of any partys ongoing strategy to appeal to the electorate. Meanwhile,
allegations of electoral fraud continue, especially at the local level. The PRI /state has a
long history of finding ways to maintain its political capacity, and current events seem to
bolster this image.
Analysts are divided over whether to consider Mexico a strong or a weak state
(e.g., Collier 1992, Erfani 1995). A strong state has the capacity to virtually ignore
societal interests when choosing and implementing policies, whereas a weak state must
pay greater heed to societal demands (Collier 1992:126). In considering the relative
strength of the state, the interplay between political and economic liberalization is
highlighted.
In this study, the PRI/state is generally considered more of a strong state than a
weak state; nonetheless, it has relative strengths and vulnerabilities in its relations to
different social sectors (Collier 1992:126). Traditionally, the Mexican state has enjoyed a
strong position vis--vis labor, but more recently, it faces a weaker position vis--vis the
private sector. As the private sector gains prominence and economic significance through


Mexican Corporatism, Clientelism and Corruption 93
The Sexenio 104
Neoliberal Policies and Trade Agreements 107
Conclusion Ill
5 THE MAINTENANCE OF INSTITUTIONAL INFLUENCE IN MEXICO:
CORPORATIST INSTITUTIONS, PACTS, AND STATE-LABOR
INSTITUTIONS 115
General Institutional Effects at the National Level 116
Declining Corporatism and Clientelism? 124
Corporatist Institutions Embodied in Pacts at the National Level
during Neoliberal Reforms 129
The Pact of DominationAn Informal Pact 130
The Pact for Economic Solidarity and other Formal Pacts 131
State Institutions Impacting Neoliberal Reforms to the Labor Sector 136
Historical Incorporation of Labor into the Corporatist System 136
Institutional Continuity during Neoliberal Reforms to the Labor Sector 140
Conclusion 150
6 THE INSTITUTIONAL INFLUENCE ON NEOLIBERAL REFORMS IN
THE AGRARIAN SECTOR 153
Comparative Background: Agrarian Counter-Reform in Latin America 155
Nicaragua: Sandinista Agricultural Cooperatives 156
Chile: From Asentamientos to Parcelas 158
Comparative Observations on Institutional Heritage during Agrarian
Counter-Reforms 161
The Ejido and Ejidal Reforms 162
Historical Role of the Ejido 162
Reasons for the Proposed Dismantling of the Ejido 164
The Current Status of the Reforms: The Implementation of PROCEDE
and Private Sector-Ejido Joint Ventures 168
The Role of the State during these Neoliberal Reforms in the Agrarian
Sector 186
The Influence of the CNC, the FNOC and the IMSS 191
The Procuradura Agraria and Other Institutions 194
PRONASOL 199
PROCAMPO 205
Conclusions 208
7 CONCLUSIONS: DEVELOPMENTAL IMPLICATIONS OF
INSTITUTIONAL EFFECTS 210
Summary of Institutional Effects 211
vii


161
with a particular asentamiento and the benefits associated with it appear to have had no
enduring impact on the sector.
The absence of institutional continuity in this case was caused by two main factors.
First, the asentamientos did not have much of a history. The first were initiated in 1967,
(with the great majority created between 1970 and 1973), and the dismantling began in
1973. Second, the informal norms and values that bolstered identification with
asentamientos were quickly unraveled by the state-orchestrated struggle for parcelas. In
sum, the rate of parcela sales appears to be linear and largely dependent on geographical
location, rather than influenced by the cooperative institutions set in place during agrarian
reform.
Comparative Observations on Institutional Heritage during Agrarian
Counter-Reforms
Both Chile and Nicaragua experienced agrarian reform under a socialist
government followed by counter-reform under governments following neoliberal tenets.
The differences in outcomes are influenced by the political context of each. The
Nicaraguan counter-reform occurred in a context of political liberalization, whereas the
Chilean counter-reform transpired in a context of authoritarianism. The Nicaraguan
example reveals the effects of the previous cooperative institutions on the use of those
lands today, a decade after the end of the reforms. The Chilean example, on the other
hand, reveals a different outcome. The combination of the short institutional history of the
agrarian reform coupled with the overt goal of dismantling the cooperatives and atomizing
former members have caused land use and land sales to depend almost exclusively on their
potential for export production.


234
Bergstein, Fred C. and John Williamson. 1994. Introduction, in John Williamson, ed.,
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International Economics.
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Irwin, ed., Cambridge, MA: MIT Press.
Bierma, Paige. 1998. Work in Progress, Business Mexico. VIII (2) 8+, February.
Bird, Graham and Ann Helwege. 1994a. Introduction. in Bill Graham and Ann Helwege,
eds., Latin Americas Economic Future London: Academic Press.
1994b. Latin Americas Economic Future London: Academic Press.
Bizberg, Iln. 1993. Modernization and Corporatism in Government-Labour Relations,
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Press.
Boletn de Prensa, No. 33/98," November 17, 1998, Secretara de la Reforma Agraria,
press release, Mexico City, Mexico.
Bower, Hilary. 1998. Power, Passion and Politics, Geographical Magazine. 70:16-23.
Brachet-Marquez, Viviane. 1994. The Dynamics of Domination: State. Class, and Social
Reform in Mexico. 1910-1990. Pittsburgh : University of Pittsburgh Press.
Bradford, Colin I. Jr., ed. 1994. Redefining the State in Latin America. Paris: OECD.
Brandenburg, Frank R. 1964. The Making of Modern Mexico. Englewood Cliffs, N.J.,
Prentice-Hall.
Brenner, Anita. 1971 [1943], The Wind that Swept Mexico: The History of the Mexican
Revolution. 1910-1942. Austin: University of Texas Press.
Bresser Pereira, Luiz Carlos. 1996. Economic Crisis and State Reform in Brazil: Toward a
New Interpretation of Latin America. Boulder, London: Lynne Rienner.
Brown, Pete. 1997. Institutions, Inequalities, and the Impact of Agrarian Reform on
Rural Mexican Communities, Human Organization. 56:102-110.
Buchanan, James and Gordon Tullock. 1962. The Calculus of Consent: Logical
Foundations of Constitutional Democracy. Ann Arbor: University of Michigan
Press.


39
makes generalization challenging, yet not impossible. Institutions are seen as providing J
the contexts in which individuals make decisions:
Mental constructs, economic and social institutions, and politics interact to
channel economic development along different paths, for instance, without
one necessarily being able to determine which of these elements is causally
primary or even to know whether the same combination would produce the
same results if repeated at a later point in time. (Immergut 1998 :19)
The examination of the path dependency of development by historical institutionalists is
similar to the work of neoinstitutionalist Douglass North (1990) as well as the work on
policy martingales among sociological institutionalists. The similarities between different
types of neoinstitutionalists are highlighted by this example. These path dependency
approaches do have subtle differences: Norths neoinstitutionalism begins with (qualified)
assumptions about the behavior of individuals, sociological institutionalism begins with
assumptions about the role of institutions, and historical institutionalists are eclectic, using
either a calculus approach or a cultural approach (Hall and Taylor 1996:939-940). *2
A third theme common in the work of historical institutionalists is that of
contingent development. By emphasizing the fortuitousness of political, economic and
social development, historical institutionalists are able to reveal how irrational outcomes
often come to pass. They show the difficulties of predicting future events with certainty:
Our understanding of particular events and developments is constrained by
the large role played by chance. Quirks of fate are responsible for
accidental combinations of factors that may nevertheless have lasting
effects. In addition, self-conscious political actors...can divert the
supposedly ineluctable march of progress onto unexpected paths.
(Immergut 1998:19)
According to a calculus approach, institutions provide actors with information that
affects their choices, whereas according to a cultural approach, individuals are seen as
satisficers who follow routines (Hall and Taylor 1996:939).


157
(Jonakin 1996:1186). Parceling the CAS land was seen as important, but titles that
allowed for transfer of the land had not been obtained.
It is still early to tell what the long-term effects of the Nicaraguan counter-reform
experience are. In January 1997, President Amoldo Aleman, a member of the right-wing
Liberal Alliance party, came to power and sought to return agrarian reform lands to their
previous owners (Bower 1998:21). Former land-owners resurfaced from exile to make
claims on their former properties, and violent confrontations began that culminated in a
general strike. In an attempt to resolve this situation, in November 1997 a bill was passed
that promised to give titles to agrarian reform recipients who had received less than 35
hectares^ (Economist. December 20, 1997:31). This represents a majority of the
recipients. Those with larger properties that were unjustly confiscated have 15 years to
pay for them or return them to their former owners (Bower 1998:21). Recipients of CAS
lands have begun to receive titles as a means of rectifying the land disputes that continued
under the Aleman administration.
The promise of titles may serve to significantly reduce sales of certain CAS lands.
After poverty (cited in 64 percent of the cases), the second most cited explanation for land
sales (occurring in 29 percent of the cases) was:
.. .the uncertainty of the property rights to the land. The replies that
highlighted tenure uncertainty were depicted as either fear that the state
would expropriate the land, or that the old owners would return and seek
to reclaim the land. (Jonakin 1996:1187).
7 One hectare is equal to 2.471 acres.


220
discussed here, one of the most formidable is the ejido. Almost 30,000 ejidos exist in
Mexico, and they account for about half of the national territory, so their size is
indisputable. Modern ejidos have been created since the end of the Mexican Revolution,
and ejidos are supported by many institutions (including both formal institutions such as
the CNC and informal institutions such as deep communal ideologies). Thus ejidos enjoy
a heritage, size and institutional milieu that make them resolute forces during the
implementation of reforms.
Conceivably the second most influential institution examined in this study is the
Federal Labor Law (LFT). The LFT dates back to 1931. Its size is measured in terms of
the breadth of its impact on Mexican labor. The LFT influences hiring, promotions,
dismissals, contracts and mobility of labor, and thereby influences such things as
productivity and technological change. The LFT is a formal institution that was staunchly
supported by the CTM under Fidel Velzquez for many decades.
Informal corporatist institutions also rank among the most influential of those
discussed here. These institutions define the vertical relations between broad social
groups and the state at the national level, as well as between subnational groups and the
local level. Corporatist roots predate the Revolution, and were reforged in the 1930s
under Crdenas. Corporatist interactions permeate many political relations in Mexico.
These informal institutions maintain their presence through the mass organizations of the
PRI/state.
All three of the most significant institutions mentioned here share the
characteristics of a long heritage, impressive size and supportive institutional milieu.
Other institutions discussed in this study are characterized by greater weaknesses on one


20
The study of the role of institutions is plagued by an ongoing tension. Institutions
and individuals are factors in systems where cause and effect are blurred by constant
interaction. The origin of motivation is sought in the ongoing question: Do institutions
motivate individuals to act in certain ways, or do rational individuals create institutions
according to utility-maximizing blueprints? In the attempt to pin down the source of
motivation, the analyst must often ignore certain contradictory effects. Yet scholars must
attempt the task, or risk gaining no insights whatsoever. The study of institutions,
therefore, has been approached from what may be viewed as two general starting points:
the individual or the institution. 3
Each of these initiation points provides a gateway to fruitful analyses. Yet even if
performed by the best of scholars, an infinite number of studies from just one of these
initiation points would still result in an incomplete depiction of reality. All theories must,
by their very nature, generalize. When two theoretical perspectives describe similar sets of
interactions, scholars should perceive the benefit to the academic field of continuing
research from each perspective when attempting to gain knowledge.4 The two theories
may fundamentally contradict each other, yet sound reasoning suggests that reality is best
understood through the use of the insights of both perspectives. In this manner, the best
use of institutional theories will be gained:
... [Pjrogress is likely to emerge by looking at bi-focal or tri-focal areas...,
which is not to be confused with academic fence-sitting... .to try to work
past the immediate obstacles to mix what may at first appear as oil and
3 For other ways of organizing the study of institutions see, for example, Resen (1998) or
Keman (1998).
4 Many scholars make this argument. See, for example, Immergut (1998), Resen (1998),
Kato (1996), Koeble (1995), Ethington and McDonagh (1995), etc.


126
Again, there is an historical precedent; setting up parallel systems of
intervention is a common theme in Mexican political history which has not
hitherto been labelled as neo-corporatist. (Jones 1996:197-198)
Neocorporatism is granted space only to incorporate new sectors, not to undo state-
corporatism. The term neocorporatism can be used to mean different things in different
contexts, and in the Mexican context it should not be construed to represent a significant
shift in control from state to society. On the contrary, it describes a co-opting of more
societal groups without meeting new societal demands. Mexican neocorporatism may
counter-intuitively imply a strengthening of the state vis--vis civil society (Harvey
1993b:214).
Disassembling corporatist institutions is a more complex task than is frequently
acknowledged. The attempt to reform the Mexican political system by doing away with
corporatist ties sometimes backfires (Craske 1996). For example, from 1989 to 1993
there was an attempt to reform the popular sector of the PRI, including regularizing
membership and making political practices more transparent. 6 After a series of reform
strategies,^ the reforms eventually failed. The reforms failed because of the PRIs
contribution to the maintenance of power by elites, who worked to keep the old
institutions in place in order to continue systematically reaping personal rewards.8 Certain
6 The popular sector is the third pillar of the PRI, originally called the Confederacin
Nacional de Organizaciones Popidares (National Confederation of Popular
Organizations, or CNOP). The CNOP changed names to Une-Ciudadanos en Movimenio
(Unite-Citizens on the Move) in 1989 and to Federacin Nacional de Organizaciones y
Ciudadanos (National Federation of Organizations and Citizens, or FNOC) in 1993
(Craske 1996:84-86).
7 See Craske 1996:84-86.
8 The attempt to reform the popular sector reaffirmed both the power of the PRI and the
importance of corporatist institutions, as revealed by Craske:


132
political landscape since the Revolution. Examples of such intersectoral pacts include in
the annual formal economic pacts created between 1987 and 1997. The first of these, the
Pacto de Solidaridad Econmico (Pact for Economic Solidarity or PSE) was signed on
December 15, 1987 by former President Salinas and representatives of the labor, farming,
and business sectors (Aspe 1993:22). 12 These sectors overlap with sectors incorporated
into the PRI and benefiting from the corporatist system, as described in Chapter 4.12
The PSE was established to fulfill both economic and political roles:
... [T]he... PSE... was established as an agreement between the economic
elite, the official labour unions and the government to reduce inflation by
means of wage reductions and price control. The political purpose of the
PSE was the re-establishment of class harmony and a moderated
reformulation of the tripartite social pact with a corporatist nature.
(Fernndez Jilberto and Hogenboom 1996:150)
The PSE is evidence that the historical social pact between the Mexican state and key
social groups remains important during the period of neoliberal reforms. 14 The
12 Grindle recounts the agreements of each sector:
The government agreed to discipline public finances, cutting spending to
20.5 percent of GDP and increasing revenues. Workers agreed to
moderate their future wage demands in return for a short-term adjustment
of 38 percent and an incomes policy based on a basket of basic
commodities. In return for wage restraint, business promised to increase
productivity and lower profit margins. The bargain for farmers included
relative price adjustments in return for increases in productivity. The
government committed itself to tight monetary policy, an exchange rate
policy to minimize the need for major devaluations, expansion of trade
liberalization, and privatization of the large public enterprise sector.
(Grindle 1996:56)
12 Labor and peasant sectors have historically been incorporated. Big business has
historically benefited from the wage controls on labor as well as the state subsidies during
1ST
14 Lustig explains that,
[Although the popularity of de la Madrids government was not high, the
Mexican state had the institutional clout and authority to make


195
PROCEDE. An organization that had traditionally supported coffee producers in the area
(INMECAPE) was shut down between 1989 and 1993. Neoliberal reforms sometimes
transferred state support to other government institutions rather than eliminating it
entirely (Baitenmann 1998). In the coffee sector at the time, Government support... was
transferredpartially and in an uncoordinated mannerto a number of agencies
(including SARH, INI, PRONASOL, BANRURAL, and state governments (Baitenmann
1998:119-120).
This tendency is often overlooked in studies of the dismantling of the Mexican
state. Although the role for the state has changed dramatically, in important ways, some
state institutions fulfill many of the same functions they always have, and in the same
corporatist fashion. Other old and/or new state institutions take on the traditional
functions of other reformed state institutions. Rather than disappearing, state
institutions continue to play a significant role in ejidal affairs, in contrast to the rhetoric
of neoliberal reforms (Baitenmann 1998; Goldring 1998; Jones and Ward 1998).
Governmental regulation has increased and ejidatarios now have to deal with an array of
agencies and programs that ... [are] difficult to differentiateProcuradura, Promotoria,
PROCAMPO, PROCEDE, PRONASOL, PROCAFE (Baitenmann 1998:120). In
addition, a total of nine government agencies participated in PROCEDE alone
(Baitenmann 1998:120).47 Of course, the PROCEDE land-titling project is enormous,
and it is not surprising that the Mexican government utilizes available institutional
resources to carry out such a large project. Yet the outcome of this institutional overlap
47 These included the Procuradura Agraria, Secretara de la Reforma Agraria, INEGI,
Registro Agraria Nacional, Secretara de Desarrollo Social, the then Secretara de


96
Philippe Schmitter (1974) argues against the explanatory power of a (corporatist) political
culture approach and in favor of an agent-centered approach. Yet as Stepan points out,
Schmitters arguments are weakened by his dismissal of the role of political culture and
historical continuity (Stepan 1978:54). Stepan argues that,
Schmitter explicitly rejects the utility of a political culture approach to the
emergence and consolidation of corporatist regimes... [H]is rejection of any
historically based explanation leads him to what are somewhat strained
positions... [Wjhile he correctly places an emphasis on the role of
corporatist practices in structuring patterns of interest representation, he
also documents that by and large a wide variety of elites accept this
pattern as concurrent with the political culture into which they were
initially socialized and which they operationally acquire. (Stepan 1978:53-
54, fn. 19, emphasis added)
From a historical-institutionalist perspective, the acceptance by elites of preexisting
patterns of interest representation is evidence of the explanatory power of institutions.
Schmitters position cannot explain the persistence of a variety of similar corporatist forms
over a period of centuries. Stepans discussion, on the other hand, highlights the benefits
of integrating the insights of structural and agent-centered approaches. His position
represents a middle ground between Schmitter and Wiarda. Wiardas view of corporatism
is an extreme which has been labeled corporatism as cultural continuity (Stepan
1978:54). Stepan reveals that, .. corporatism as structure is always only a partial
sectoral phenomenon of the overall political system, and ... supplementary analytical
frameworks must be used to study other aspects of the system (Stepan 1978:71).
Although there are some benefits in the view of corporatism as elite response to crisis,
culture. .not just in the traditional regimes but in various modernizing ones
as well. (Wiarda 1981:117)


214
hand, the pacts relied upon historical corporatist ties, thereby undermining the reformist
ideals of transparency and democracy.
The state-labor alliance is an example of an informal state institution that impacts
the implementation of reforms. Some groups considered breaking the alliance a necessary
means of advancing neoliberalism, whereas others viewed it as a way of slowing neoliberal
reforms (Collier 1992:8). The official labor organization, the CTM, basically coopts
progressive workers movements, subordinating labor to the demands of the state During
the economic pacts of the 1980s and 1990s, CTM-leader Fidel Velzquez did little to slow
economic reforms, although he did try to slow party reforms (Craske 1996:81). Despite
the current weakness of the CTM, the most significant new independent labor movement,
the UNT, has begun to form alliances with the CTM and the PRI (National Union of
Workers... 1998:5). The strength of the state-labor alliance has historically experienced
periods of rising and declining significance, and evidence from the 1990s does not suggest
the end of the institutionalized relationship that relies on corporatist rather than liberal
criteria for labor relations. Thus some aspects of the state-labor alliance hinder the
advance of neoliberal reforms, while other aspects allow the reforms to proceed.
Other labor institutions also affect the implementation of neoliberal reforms in a
myriad of ways. The 1993 liberalization of the wage system failed to achieve its objective
of promoting productivity. The traditional federal labor authorities, the Congress of Work
(controlled by state-affiliated unions) and informal labor norms also continued to be
influential in the 1990s (Pozas 1996). Similarly, labor and social security legislation
hinders the success of the reforms. The Federal Labor Law creates insecurity by
promoting the use of subcontractors (Dvila 1997). It also mandates the use of seniority


88
clientelism and corruption, and information about the sexenio (the six-year term for
presidential office). This essential background is summarized below.
The Relationship Between the PRI and the State
Throughout much of the 20th century, the Mexican political system has been
characterized by PRI-state fusion and statism.8 The dominance of the official party in
Mexican politics dates back to 1929, although it has been renamed twice since its
inception. President Plutarco Elias Calles created the Partido Nacional Revolucionario
(the National Revolutionary Party or PNR) in 1929. In March 1938, populist President
Lzaro Crdenas renamed it the Partido de la Revolucin Mexicana (Mexican
Revolutionary Party or PRM). President Crdenas did more than any other post-
Revolutionary president to fulfill many Revolutionary demands, especially through
agrarian reform.
With the changes instituted by Crdenas, corporatist organization was solidified
under the ruling party:
The old geographical and individual membership structure of the PNR gave
way to an organization of four sectorslabor, agrarian, military, and
popular. The first sector was turned over to trade unionists, the second to
the ejidatarios, the third to the soldiers, and the fourth to civil servants and
miscellaneous elements. These four sectors collectively decided which
among them should be allotted specific public offices to fill, then turned
over the actual nominating process to the designated sector. Once this
sector announced its nomination, all four sectors were pledged to support
the candidate at the polls (Brandenburg 1964:91).
Other than the military sector, which was dissolved in 1940, the corporatist organization
that was formalized under Crdenas has a long heritage. In 1946 Miguel Alemn
8 In statism, the state plays a dominant role in the political economy of a country.


51
The characteristics of formal institutions were imprinted even earlier than is readily
apparent upon first examination (Graham 1990).^ After the 1930s, the involvement of the
state in development grew rapidly.
In the early decades of horizontal ISI, the region enjoyed a growth in
industrialization, but the strategy had inherent limitations, since domestic markets were
limited (Dietz 1995a: 10). At this time, the scholarship of Ral Prebisch, the first director
of the United Nations Economic Commission for Latin America (ECLA) gained
significance.^ In the 1940s, Prebisch formulated a concept of unequal exchange in the
trade relations between developed countries at the center of the world economy and
developing countries at the periphery (Prebisch 1950). According to Prebisch, the
countries that industrialized first enjoy an advantage that is perpetuated over time.^
Peripheral countries supply raw materials to central countries at ever deteriorating terms
of trade. According to this hypothesis, the world economic system is characterized by a
hegemonic relationship of the center over the periphery. To break this hegemony, price
protections for primary products were necessary along with rapid industrialization of the
periphery (Love 1995[1980]:112).
In an effort to break out of this relationship, after World War Two the second
stage of ISI, vertical ISI, had begun (Dietz 1995a: 10). Vertical ISI was adopted by larger
3 For the case of Mexico, which has had a very stable political system since the Mexican
Revolution in the early 20th century, state institutions are organized and operate in ways
that often reveal roots predating World War Two.
4 The name of the ECLA was later changed to the Economic Commission for Latin
America and the Caribbean (ECLAC).
5 For a discussion, see Ocampo (1995 [1993]).


118
The PRI regime is famed for its longevity and stability. This political stability is a
result of the fact that the ruling party is based on an ongoing compromise between two
factions: the modernizing tcnicos and the traditionalist politicos. This split was
established in 1963 (Collier 1992:97). The traditionalists are career politicians, and are
referred to as dinosaurs by the modernizers. The modernizers, on the other hand, are
professionally educated holders of top cabinet and policy-making posts who rose through
bureaucratic and administrative ranks rather than political, party, or electoral careers
(Collier 1992:86). Yet the tcnicos economic policy-making does have political links,
since they are politically sensitive to the demands of the private sector. They have
attempted to move the state away from its alliance with peasant and labor sectors in favor
of the urban middle classes. Thus tcnicos can benefit politically from opening the
economic system. This rough distinction between politicos and tcnicos is only one aspect
of the divisions within the PRI. In terms of political liberalization, politicos and tcnicos
are also divided into those who want to maintain one-party hegemony and those who
favor political opening (Collier 1992:125).
The lack of consensus within the PRI causes political conflicts to become
manifested in PRI institutions. As tcnicos push neoliberal policies, their policies are
supported by the private sector. Private sector support benefits the tcnicos politically,
and their strength gains relative to the politicos. Politically, however, if the PRI loses too
much support from traditional sectors, it faces the possibility of losing political power to
the extent that it might no longer be able to implement neoliberal policies. Thus, changes
in economic policies have reflected political compromises between politicos and tcnicos.


50
deemed inefficient and / or inappropriate during the 1980s and 1990s in Latin America.
As will be discussed, historical imprinting is conspicuous on both formal and informal
institutions and affects the attempt to reform them. The applicability of a historical
institutionalist perspective to the present study is clarified using this general discussion
about Latin American state institutions as a starting ground. This chapter sets the stage
for a case study of one Latin American state (Mexico) to shed more light on the role of
institutions during neoliberal reforms.
Latin American Development Strategies and Institutional Heritage
Prior to the Great Depression, Latin America was heavily dependent on exports
for its economic growth. A succession of balance-of-payments crises resulted in a critical
rethinking of the conventional belief in the benefits of free trade, and the adoption of a
new growth strategy in the region (Dietz 1995a:9). The Great Depression had isolated
world markets, creating incentives for the development of domestic industries. The new
growth strategy was embodied in the ISI model of development.
ISI could be either horizontal or vertical (Dietz 1995a:9,10). Horizontal, or easy
ISI emphasized the domestic production of simple, nondurable, manufactured consumer
goodsfurniture, textiles, glassware, beverages and so onto replace those being
imported (Dietz 1995a:9). This type of ISI was especially popular as early as the 1930s,
and during this period many of the bureaucratic agencies of the state began to grow in
Latin America. In the creation of these institutions of public administration, European
concepts of public administration were matched with United States (U.S.) techniques such
as scientific management and other technical administrative skills (Graham 1990:35-36).


230
To combat the possibility that the reforms could lose political support to such an
extent that they may be reversed, one group of scholars recommends strengthening
domestic banking systems, advancing education reform, increasing social protection and
improving key social services (Morrow 1998:6). All of these areas have suffered as a
result of neoliberal reforms. For example, in Mexico, neoliberal reforms sought to reduce
the constitutional protections enjoyed by labor. Many of the proposed improvements in
social services seem peculiarly similar to policies maintained by states prior to fiscal
retrenchment. Even countries that initially embraced strict neoliberal policies may end up
following recommendations that revive the role of some state institutions in development
As in the case of the ejido in Mexico, policy makers will be able to stimulate development
better if they reexamine existing state institutions carefully and with greater imagination
about reform (rather than simple elimination). Similar steps could be taken in areas such
as labor legislation, education and health care.
As the significance of state institutions receives greater attention, policy makers
may move further away from their original neoliberal recommendations, in favor of
policies tailored more closely to the particular institutional characteristics of each country.
These types of reforms do not involve simplistic procedures or blueprints, but rather, are
painstaking, lengthy and offer almost exclusively long-term benefits. Rather than
recommending the dismantling of institutions, policy makers should be prepared to accept
a bigger part of the institutional context as a given, and prepare their recommendations
accordingly. In this fashion, their recommendations would be better suited to the
particular needs of each development case.


37
framework, rather than directing their energies to resisting, eroding or
terminating that framework. (Stepan 1978:292)
By defining institutionalization in this fashion, Stepan emphasizes the autonomous power a
regime may possess: it is capable of control, establishes patterns and forges
constituencies. He draws attention to the role of institutionalization (i.e., the construction
of rules) in political-economic life.
Skocpol (1985) similarly emphasizes the role of the state in political-economy.
Like other historical institutionalists, she usually approaches the study of her subject
matter in an inductive manner. Skocpol, in Why I am a Historical Institutionalist
(1995), explains that in her 1992 book, 11 the patterns she tries to explain came to her
attention through empirical rummaging, not theorizing (Skocpol 1995:104). Similarly,
Thelen and Steinmo explain that,
Rather than deducing hypotheses on the basis of global assumptions and
prior to the analysis, historical institutionalists generally develop their
hypotheses more inductively, in the course of interpreting the empirical
material itself. The more inductive approach of historical institutionalists
reflects a different approach to the study of politics that essentially rejects
the idea that political behavior can be analyzed with the same techniques
that may be useful in economics. (Thelen and Steinmo 1992:12)
The unearthing of the evidence for this study of institutional impacts during the
implementation of neoliberal reforms similarly contributed in an inductive fashion to the
construction of subsequent hypotheses about institutional significance. The historical
institutional perspective provides the best support for both the qualitative examination and
the sub-national level of analysis used here.
11 Theda Skocpol, Protecting Soldiers and Mothers: The Political Origins of Social Policy
in the United States (Cambridge: Cambridge University Press, 1992).


116
General Institutional Effects at the National Level
A number of scholars provide general assessments of the extent of neoliberal
reforms and point to institutional effects impacting their implementation (e g., Ramamurti
1999, Roett 1995, Teichman 1996). The success of reforms has been mediated by formal
and informal state institutions, and discrepancies exist between the pronounced national
development policy goals and the policies actually implemented (Teichman 1996). After
the debt crisis of the early 1980s, Mexicos neoliberal reforms were characteristically slow
rather than rapid (Teichman 1996). 1 Trade liberalization did not begin to take place until
1985, external economic events in 1987 and 1988 caused a deepening of the process of
economic restructuring and badly needed fiscal reforms began in 1989 (Teichman
1996:155; Tornell 1995:70). The timing of these policy reforms lagged years behind the
original rhetoric of reform (which followed on the heels of the debt crisis of the early
1980s). Even by 1996 only 21.13 percent of all state-owned enterprises (SOEs) in
Mexico had been privatized (Ramamurti 1999:141).2
A variety of institutionalized commitments carried out through various state
institutions initially served to dampen the reforms of many national policies (evenly and
1 According to Teichman, this was especially true during the first several years of the
reforms:
Despite what appeared to be a firm commitment to structural change,
however, the government proceeded slowly with its program. During 1983
and 1984, import controls and subsidies remained in effect. And although
the state divested itself of over 200 public enterprises... these enterprises
were either paper companies or were in areas considered neither strategic
nor priority. (Teichman 1996:153)
2 Ramamurti provides data on 24 developing countries and describes their privatization
programs in general as languishing (Ramamurti 1999:142).


To my Grandmother, Emma Klein Just


170
in reaching agreement during different phases may also result in ejidos essentially
abandoning the process altogether. In cases where this occurs, the institutionalized ejido
proves resilient in the face of its neoliberal alternative (titled lands). To determine how
significant these effects are, a number of sources are used.
This examination of the ejidal land certification process begins with a review of
PROCEDE statistics published over various years by the agrarian sector. Table Four
presents data on the number and percentage of ejidos and agrarian communities
participating in PROCEDE, as well as the number and percentage of these agrarian groups
eventually certified through PROCEDE by the end of each year. Figure One presents this
same data in a more visual format.
PROCEDE began in late 1992, and was expected to complete the titling process
prior to the end of 1994 (Appendini 1998:31). Yet by the end of 1994, only 5,994 ejidos
(22 percent of the total) had completed the certification process (PROCEDE data from
the Registro Agrario Nacional14). Thus the program has been operating far behind the
intended schedule of completion virtually since its inception. The slow progress towards
completion of the titling process is further highlighted when considering that the
Procuradura Agraria chose to target the ejidos that would be easiest to process first
(Baitenmann 1998:118). Initially, PROCEDE focused attention on:
...the more rural ejidos, ejidos with less than one thousand members, and
those whose topography would not be a major technical obstacle. In the
end, however, ...few guidelines were followed. .. Procuradura field staff
approached any ejido that had relatively few smoldering internal conflicts
and, more importantly, no unresolved legal or administrative matters.
(Baitenmann 1998:118)
Data are from the Direccin General de Titulacin y Control Documental, sent to the
author from the RAN in June 1999.


203
was made between PRONASOL and the Popular Sector or the PRJ. Thus
rather than replacing clientelism with clear rules which may represent
pork-barrel politics but nothing more, it is actually reinforcing many of
the trends which the modernisers want to change. (Craske 1996:89)
Through PRONASOL, the changes to corporatist institutions during the 1990s
have broadened the base of inclusion while reducing the impact of such incorporation
when politically feasible. This Mexican neocorporatism may actually hurt some social
constituencies, at least during the short run and perhaps even in the long run:
...since most PRONASOL financing is channeled through municipal
presidencies, the old power structures are being marginalized from the
new system, or at least they are left with diminished and more conditioned
power...
Thus, in organizing the new solidarity committees, the Salinas
administration attained two goals: On the one hand, it competed with the
traditional left-wing organizations for their social constituency; on the
other, it evaded traditional corporatist structures while generating parallel
structures, independent from traditional PRI organizations, such as CNC
(Moguel, 1992a:44).... This is an important difference between old
corporatism and neocorporatism: Under the former, social constituencies
were in a better position to press for their demands. (Otero 1996:15)
Power under neocorporatism is concentrated even more strongly in the hands of the state,
and as arbitrarily as ever. Petitions to PRONASOL were judged arbitrarily rather than
according to clear cut criteria of worthiness (Craske 1996:89).
The disappearance of corporatist norms is neither complete nor imminent, and
corporatism and neocorporatism will continue to be of significance to Mexican
development even after the implementation of neoliberal reforms (Craske 1996;
Fernndez Jilberto and Hogenboom 1996; Otero 1996). This examination of
PRONASOL has revealed that corporatist norms interfere with the neoliberal goal of
using efficient and rational means to select the beneficiaries of federal social


THE INFLUENCE OF STATE INSTITUTIONS ON THE IMPLEMENTATION OF
NEOLIBERAL REFORMS: EVIDENCE FROM THE MEXICAN CASE
By
DIANE MICHAELLE JUST
A DISSERTATION PRESENTED TO THE GRADUATE SCHOOL
OF THE UNIVERSITY OF FLORIDA IN PARTIAL FULFILLMENT
OF THE REQUIREMENTS FOR THE DEGREE OF
DOCTOR OF PHILOSOPHY
UNIVERSITY OF FLORIDA
1999

Copyright 1999
by
Diane Just

To my Grandmother, Emma Klein Just

ACKNOWLEDGMENTS
Without the unwavering assistance of a number of very special individuals, this
project would never have been possible. First and foremost I would like to thank my
advisor, Dr. Philip Williams, for his support throughout this process. I owe him a debt of
gratitude for his advice, direction and boundless patience. He has especially encouraged
me to look at labor issues that 1 might otherwise have neglected, and this project is far
better balanced as a result. I am also enormously grateful for the help of each of my
committee members, who have contributed in different ways over the years to the
completion of this work. Dr. Leann Brown has compelled me to organize my thoughts
more coherently, and to think critically about definitions and methodology. Dr. Goran
Hyden has provided crucial comments on several drafts at different stages of completion,
and motivated a reorganization of my theoretical discussion. Dr. Michael Chege has been
at hand to discuss the direction of this work, and has aided my conceptualization of
institutional theories. Dr. Clyde Kiker has provided insights about the logical development
of my arguments, and stuck with this project even when it moved in a direction that lies
outside his usual interests. I would also like to thank Dr. Steven Sanderson, my advisor
during the early stages of this project, for helping to bring me to the University of Florida,
spurring my interest in development issues, and guiding my study of Latin America.
Enormous thanks go to my parents, Dr. and Mrs. John J. Just, for their love and
support through the ups and downs of writing, and for reading and commenting on drafts.
IV

They have happily done far more than most parents would ever attempt. 1 am grateful to
my Grandmother, Emma Just, to whom this work is dedicated, for her constant
encouragement of my intellectual development and my interest in international issues.
Special thanks are also due to my boss, Dr. Joel B. Cohen, for his willingness to
accommodate my academic schedule and deadlines over the years. I am also extremely
grateful to the Lola Cruz and the entire Santoyo-Cruz family for letting me get to know
Mexico from within their remarkable household. Without their generosity and
benevolence, I would never have come to care so deeply about Mexico, nor struggled so
hard to understand it. Last but certainly not least, I would like to thank my fianc, Faure
Joel Malo de Molina Faxas, for his unending encouragement and loving support during
many long hours of work.
v

TABLE OF CONTENTS
page
ACKNOWLEDGMENTS iv
ABSTRACT ix
CHAPTERS
1 INTRODUCTION: HOW DO INSTITUTIONS IMPACT NEOLIBERAL
REFORMS? 1
The Spread of Neoliberalism 2
Definition of Institutions 8
Theoretical and Methodological Approach 11
2 IMPACTS OF INSTITUTIONAL FACTORS ON NEOLIBERAL
DEVELOPMENT POLICY: THEORETICAL SUPPORT 17
What is Meant by the Umbrella Term Institutional Approach? 17
Approaches to the Study of Institutions 19
Rational Choice 22
Sociological / Organizational Institutionalism 28
Historical Institutionalism 35
Policy Implementation Literature 41
Conclusion 45
3 STATE INSTITUTIONAL POWER DURING THE IMPLEMENTATION
OF NEOLIBERAL POLICIES IN LATIN AMERICA 48
Latin American Development Strategies and Institutional Heritage 50
The Spread of Neoliberalism 60
The Emphasis on Change in Literature about Neoliberal Reforms 65
Evidence of Continuity due to Institutions during Reforms 69
Conclusion 78
4 CASE BACKGROUND: THE HISTORY OF THE
INSTITUTIONALIZATION OF THE MEXICAN STATE 80
The Institutional Heritage of the Mexican Revolution 83
The Relationship Between the PRI and the State 88
vi

Mexican Corporatism, Clientelism and Corruption 93
The Sexenio 104
Neoliberal Policies and Trade Agreements 107
Conclusion Ill
5 THE MAINTENANCE OF INSTITUTIONAL INFLUENCE IN MEXICO:
CORPORATIST INSTITUTIONS, PACTS, AND STATE-LABOR
INSTITUTIONS 115
General Institutional Effects at the National Level 116
Declining Corporatism and Clientelism? 124
Corporatist Institutions Embodied in Pacts at the National Level
during Neoliberal Reforms 129
The Pact of DominationAn Informal Pact 130
The Pact for Economic Solidarity and other Formal Pacts 131
State Institutions Impacting Neoliberal Reforms to the Labor Sector 136
Historical Incorporation of Labor into the Corporatist System 136
Institutional Continuity during Neoliberal Reforms to the Labor Sector 140
Conclusion 150
6 THE INSTITUTIONAL INFLUENCE ON NEOLIBERAL REFORMS IN
THE AGRARIAN SECTOR 153
Comparative Background: Agrarian Counter-Reform in Latin America 155
Nicaragua: Sandinista Agricultural Cooperatives 156
Chile: From Asentamientos to Parcelas 158
Comparative Observations on Institutional Heritage during Agrarian
Counter-Reforms 161
The Ejido and Ejidal Reforms 162
Historical Role of the Ejido 162
Reasons for the Proposed Dismantling of the Ejido 164
The Current Status of the Reforms: The Implementation of PROCEDE
and Private Sector-Ejido Joint Ventures 168
The Role of the State during these Neoliberal Reforms in the Agrarian
Sector 186
The Influence of the CNC, the FNOC and the IMSS 191
The Procuradura Agraria and Other Institutions 194
PRONASOL 199
PROCAMPO 205
Conclusions 208
7 CONCLUSIONS: DEVELOPMENTAL IMPLICATIONS OF
INSTITUTIONAL EFFECTS 210
Summary of Institutional Effects 211
vii

In Search of a Hierarchy of Significant Institutional Attributes 217
Significance of Institutional Effects to Development in General 221
A Concluding Discussion: What Does the Future Hold? 228
REFERENCES 232
BIOGRAPHICAL SKETCH 260

Abstract of Dissertation Presented to the Graduate School
of the University of Florida in Partial Fulfillment of the
Requirements for the Degree of Doctor of Philosophy
TFIE INFLUENCE OF STATE INSTITUTIONS ON THE IMPLEMENTATION OF
NEOLIBERAL REFORMS: EVIDENCE FROM THE MEXICAN CASE
By
Diane M. Just
December 1999
Chairman: Philip J. Williams
Major Department: Political Science
Since the early 1980s in Latin America, neoliberal policy makers have advanced
strategies of privatization, liberalization and structural adjustment as the solutions to
economic development problems of the region. Analysts describe a rapidly diminishing
role for the state, and point to examples of privatization and liberalization. Yet such
portrayals are overzealous: the actual implementation of neoliberal reforms has fallen short
of the outcomes originally envisioned. Having demonstrated the limits to the success of
neoliberal reforms in Latin America in general, this study moves to a case study of one
country, Mexico, in a quest for knowledge of the role of institutions during these reforms.
Using a historical institutionalist perspective, a spectrum of formal and informal
institutions of the state are found to impact these reforms. The institutions under study
include communally held lands (ejidos), the National Peasant Confederation (CNC), the
IX

Confederation of Mexican Workers (CTM), the National Federation of Organizations and
Citizens (FNOC), the Federal Labor Law (LFT), economic solidarity pacts (the PSE and
PECE), the Office of the Agrarian Counsel (PA), the National Solidarity Program
(PRONASOL) and the Direct Rural Support Program (PROCAMPO). Data from the
Program for Certification of Ejido Land Rights and the Titling of Urban House Plots
(PROCEDE) reveals the continuing significance of the ejido in Mexico today. Informal
institutions such as corporatist and clientelist norms and values are also shown to have a
significant impact. Many informal institutions of the state are reincarnated within new
formal institutions, and as a result, the state functions in many of the same ways. These
institutions hinder and distort the outcomes of neoliberal reforms, and are more enduring
than is commonly acknowledged. A brief discussion of the relative significance of various
institutions is provided. This work demonstrates the powerful heritage institutions have
even during periods widely characterized as times of change. The implications of these
results for development in other Latin American cases are also reflected upon.
x

CHAPTER 1
INTRODUCTION: HOW DO INSTITUTIONS IMPACT NEOLIBERAL REFORMS?
As the 20th century draws to a close, scholars reflect on an era of contradictions.
Exponential growth in technology, education and communication is countered by growing
environmental concerns, problems of food distribution and an expanding number of
impoverished citizens and refugees. These contrasts make the selection of sound national
development policies a serious and complex task, as policy makers must weigh the
consequences of their choices from a number of different angles. The impacts of their
decisions are frequently profound, although not always in the ways the policy makers
hope. New policies frequently fall short of their objectives because the institutional
context is not fully considered.
This study examines the impact of institutional continuities on the implementation
of development policies. Specifically, the goal is to reveal how institutions affect
neoliberal reforms. The focus on Mexico was selected both because of my experience
there and because its state institutions have deep historical roots. This research suggests
that corporatist and clientelist institutions in particular are remarkably enduring even when
other institutions are dismantled. These and other state institutions significantly alter the
success of neoliberal reforms. The implications of this study extend beyond the Mexican
case to other regions where neoliberal policies are applied.

2
This chapter will first introduce the context of neoliberal reforms, a topic that will
be further explored in Chapter 3. Since the objective of this study is to show how
institutions affect the implementation of neoliberal reforms, the discussion will first frame
the context of the reforms. Next, the term institution is operationalized and institutions
are distinguished from organizations. The focus is on state and state-affiliated institutions,
both formal and informal, as discussed below. Institutions are defined rather broadly.
In the last section of this chapter, the theoretical and methodological approach
used to decipher the role of institutions during the implementation of neoliberal reforms is
introduced. A brief description of the contents of each chapter is also provided. As
discussed below, Chapter 2 draws out how a historical institutionalist perspective provides
the best explanatory power for this study. The general review of the progress of
neoliberal reforms in Latin America in Chapter 3 is followed by a case study of the impact
of institutions on the implementation of neoliberal reforms in Mexico. A variety of
institutions are discussed, with special focus on how state agrarian and labor institutions
hinder the implementation of neoliberal reforms. The final chapter delves into the
implications of the argument made in this study for development policy making in Mexico
and other states.
The Spread of Neoliberalism
A general desire to understand why the development policies being applied in Latin
America succeed or fail was the impetus for this project. Neoliberal reforms were widely
accepted as the best solutions to debt and other economic problems during the 1980s and
most of the 1990s, but despite the passing years many indicators of development did not

3
seem to be showing improvement. Observers have vastly opposing views about the cause
of this state of affairs. Some argue that the neoliberal policies were unrealistic or flawed
from the outset, by underestimating or accepting a high initial burden on the poor. Many
others argue that the reforms simply were not enacted properly or that insufficient time
has passed for benefits to accrue.
Neoliberal views became predominant early in the 1980s among such influential
agencies and actors as the International Monetary Fund (IMF), the World Bank, the
United States (U.S.) government, policy think tanks and many academics, and by the late
1980s, the viewpoint had acquired the label of the Washington Consensus. 1 Following
the onset of the debt crisis in 1981/82, the IMF demanded of recipient governments a
commitment to neoliberal tenets as a precondition for economic assistance. The adoption
of neoliberal reforms took place gradually and unevenly, but most Latin American
countries made the first steps to these reforms during the early to mid 1980s.2
These neoliberal policies represent a significant shift from development models
based on state-led growth popular in the decades before the debt crisis. Such models were
used in Latin America, Africa and in the Eastern Bloc (World Bank 1998:10; Rodrik
1996:12). By the early 1980s, heavy indebtedness and economic instability characterized
many countries in these areas. In Mexico, for example, four broad types of policy goals
existed: (1) foreign exchange had to be generated, (2) the role of the government in the
1 Heath makes this point and notes that John Williamson of the Institute for International
Economics in Washington, D C., coined the phrase (Heath 1998:62, fn. 5).
2 For more detailed reviews of the progress of neoliberal reforms in Latin America see
Williamson (1990), Sautter (1993) and Sautter and Schinke, eds. (1996).

4
economy had to be examined, (3) economic stability had to be achieved, and (4) debt
ratios had to be addressed (Heath 1998:41-42). Similar needs were present throughout
Latin America and in other developing areas, and national policy makers accepted the
Washington Consensus as the only remaining solution.
Neoliberal views soon gained paramount importance in the development strategies
of almost all developing countries.^ They advocated a dedication to trade liberalization,
structural adjustment and privatization of state-run industries. Adjustment of domestic
economic disequilibrium was necessary in the short-term, with restructuring of
development strategies in the medium- and long-term (Mesa-Lago 1994:ix). The initial
adjustment was often referred to as shock treatment. Neoliberal reforms aim for a quick
and sweeping privatization of state-run enterprises as well as the reduction of spending on
state-run programs and institutions. Their goals include the modernization / minimization
of state institutions in exchange for a liberalization of the private sector and the promotion
of competitiveness in agriculture, industry and services. In terms of the size of the state,
according to a World Bank study, ...public sectors are reorienting themselves and
downsizing. Less is better has been the cry (World Bank 1998:83). For neoliberals, a
continuation of traditional state institutions (e g., import-substitution institutions or
3 Anne Krueger was one of the strongest critics of import-substitution industrialization
and advocate of neoliberal reforms (Rodrik 1996:12). The influential arguments made
during the 1980s and early-1990s by another advocate of the market, Deepak Lai, have
been collected in Against Dirigisme: The Case for Unshackling Economic Markets
(1994). Some Latin American proponents of neoliberalism are Hernando de Soto (see
Soto 1989) and economists such as Juan A. Morales (see Morales 1993, and Morales and
McMahon, eds., 1996) and Domingo Cavallo (see Cavallo 1997).

5
populist institutions^) represents an impediment to successful development because of
their inefficient and often corrupt structures.
In the early- and mid-1990s, more international policy makers concurred on this
view of state institutions than in earlier decades. Latin American leaders have been
primarily concerned with how to dismantle populist state institutions rather than debating
the potential benefits of their role in the national political-economy (Burki and Edwards
1996a). Neoliberal policies gained popularity in part because they were presented as
practical solutions to economic and financial problems. Neoliberals advise against special
protections for domestic producers, for example, which makes balancing a national budget
easier (Fernndez Jilberto and Mommen 1996b: 1-2).
Despite widespread acceptance during the 1980s and most of the 1990s,
neoliberalism and its concurrent recommendations were criticized, although arguments
countering the claims of neoliberals were heard less frequently, and tended to receive little
serious attention when national policies were being formed and implemented. ^ The
preponderance of neoliberal views prompted scholars to ask how this would impact
development. Prior to undertaking this study, for example, several questions came to
mind about the implementation of neoliberal policies and the implications for development:
How successful are neoliberal policies at achieving their intended outcomes, and what
4 Populism is a type of political leadership based on the use of policies designed to
create, maintain or sustain the popularity and reign of a political leader or regime. It is
criticized for the way it frequently prioritizes the political success of an individual or
regime at the expense of the long-term development goals of a polity.
5 See, for example, Gledhill (1995) or the critical discussion of neoliberalism by Petras
(1997).

6
interferes with their success? Ultimately, how neoliberal are national neoliberal policies
when put into in practice? Do discrepancies exist between national policy goals and
subnational policy implementation? Does neoliberalism inadvertently coexist with other
development policy models?
Proponents of the Washington Consensus also had occasion to pose similar
questions to themselves during the 1990s. By 1998-1999, neoliberalism has lost a great
deal of credibility even at the IMF and the World Bank. The neoliberal message itself has
changed:
... [N]eoliberalism has evolved over time, passing from its savage
capitalism phase at the start of the debt crisis, in the heyday of Ronald
Reagan and Margaret Thatcher, to a kinder, gentler neo-liberalism in the
1990s. To varying extents, neo-liberals have rediscovered the issue of
poverty, and the need to educate their citizens. At least at the level of
rhetoric, few politicians would now admit to being a neo-liberal, as the
social market has become the catchphrase of the caring 1990s. (Green
1995:177)
Even a recent World Bank (1998:11) policy research report acknowledges the
transformation from pure neoliberalism, calling its heyday,
... a brief period when government failure was seen as pervasive and
complete, and markets (if not the solution) as the only hope.
Todays...viewpragmatic but not ideologically satisfyingis that both
markets and governments have pervasive failures but that these usually are
not complete. This emphasizes that government should focus on areas
where the problems in the absence of intervention are greatestbut
government must have the capacity to improve the situation.
Perhaps the ultimate challenge to neoliberalism surfaced with the Asian economic
crisis that came to a head in Thailand on July 2, 1997, and the economic crises which
subsequently touched Russia, Latin America and even the industrialized nations (Rodrik
1998). The loss of credibility of the East Asian model hits close to the heart of neoliberal
reassessments of their recommendations. The economic performance of the four East

7
Asian tigers (South Korea, Taiwan, Singapore and Hong Kong) had been lauded as proof
of the efficacy of neoliberal ideals since the 1980s7 Evaluations of the extent to which
the East Asian economies actually followed the recommendations of the Washington
Consensus did reveal significant shortcomings (Rodrik 1996) 7 Yet the example of their
relative success prior to 1997 helped encourage many countries (especially many Latin
American countries) to follow and even surpass the East Asian countries in adherence to
the tenets of the Washington Consensus (Rodrik 1996:17-18). A prime example is
Mexico, frequently cited as one of the strictest adherents to neoliberal recommendations
(Rodrik 1996:18). The trade and financial liberalization and privatization of countries
such as Bolivia, Argentina and Mexico surpassed those of the East Asian countries
(Rodrik 1996:18). The relative success of Latin American countries in implementing
neoliberal reforms is discussed further in Chapter 3. Chapters 5 and 6 will contest the true
depth of Mexicos adherence to neoliberal tenets.
Following the problems brought on by the Asian economic crisis, the neoliberal
model is being replaced by what scholars at the World Bank now call a two-pronged
development strategy that involves an effort to:
... put in place growth-enhancing, market-oriented policies (stable macro-
economic environment, effective law and order, trade liberalization, and so
on) and ensure the provision of important public services that cannot be
well and equitably supplied by private markets (infrastructure services and
education, for instance). (World Bank 1998:11)
6 For a discussion, see Rodrik 1996:12-13.
7 Rodrik judges how closely South Korea and Taiwan followed the prescriptions of the
Washington Consensus, and awards South Korea a score of about five (out of ten) and
Taiwan a score of about six (Rodrik 1996:18).

8
Good policymaking, institution building, and the provision of public services have gained
significance alongside the development of capital markets (World Bank 1998:11).
This listpolicymaking, institution building and the provision of public services
suggests the powerful influence of state institutional variables, giving credibility to the
goal of highlighting the role of such institutions. This disquisition attempts to provide
answers to some questions about the success of neoliberalism by revealing the influence of
state institutions on the implementation of reforms. If the implementation of neoliberal
reforms is hindered and distorted by institutions, a definition of institutions is certainly in
order.
Definition of Institutions
In the social science literature institution is defined narrowly or broadly; here it is
used broadly, to refer to both formal and informal structures or processes, as discussed
below. This section will clarify the present use of institution by discussing what state
institutions are and distinguishing institutions from organizations. It will also
differentiate between formal and informal institutions.
As it is not possible or desirable to discuss every variable that influences economic
development, the present study will focus only on the role of state and state-affiliated
institutions (hereafter called simply state institutions) during the implementation of
neoliberal reforms. The state is the governing structure of a society, and includes
government agencies and bureaucratic positions, but is not merely the particular elected
regime of any given electoral period. Its size and power depend both upon historical
factors and societal influences. It has autonomous power and interests that may outweigh

9
the goals of particular governing regimes. Likewise, its needs may change under the
pressure of internal or external forces. State institutions, on the other hand, are formal
or informal institutions of the state. A state has a variety of state institutions.
Since state institutions are created by and operated for the state, they should share
its mandate and carry out its plans. Here it will be demonstrated that large deviations
from the officially proclaimed state policy are often a result of factors inherent in the
institution itself. Focusing only on state institutions will help to isolate how these
institutional effects interfere with neoliberal policies.
State institutions may or may not be formal organizations. An organization may
be an institution, but not all institutions are organizations. An organization, more
precisely, is a manifest entity designed by people to serve a purpose. Many social
scientists have grappled with the distinction between institutions and organizations. Three
common categories of organizations and institutions may be distinguished: (a)
organizations that are not institutions, (b) institutions that are not organizations, and (c)
organizations that are institutions (or vice versa, institutions that are organizations)
(Uphoff 1986:8).
In the present research, only the second and third of these institutional-
organizational links are examined. Organizations that are not institutions, or put
somewhat differently, organizations not heavily influenced by historical institutional norms
are not discussed. For example, some new state organizations created by a new governing
regime to fulfill specific new policy goals do not have an institutional heritage and are thus
not the foci of this study.

10
One difference between organizations and institutions lies in the relationship
between function and existence. An organization may survive for a time without
functioning, but when an informal institution ceases to function, its very existence is
uncertain. Some historically strong institutions occasionally seem to disappear, only to be
reborn through new channels or within new organizations.8 The strength of institutions is
frequently underestimated; evidence relevant to this notion will be examined later in this
study.
Both formal (institutionalized) organizations of the public sector and more
informal understandings of the roles and responsibilities of the state towards different
social sectors will be examined. Formal institutions of the state are fairly simple to define
and conceptualize. Informal institutions of the state are more difficult to define
coherently. Informal refers to such things as unwritten and perhaps even unspoken
agreements over relations or transactions, through which customary actions carry
obligatory meanings. Informal institutions may include historical norms, values and
traditional means of interaction. The meaning of the term informal should not be
misconstrued as unimportant. Many norms that govern interactions between state and
society are informal institutions of the state (i.e., they originated from the state or came
about through repeated interaction between the state and society). Informal institutions
include corporatist political practices, involving many unwritten ties between groups
within government and certain constituencies. An example of a formal institution, on the
other hand, is the ejidal (communally-held) system of land tenure in Mexico. Nonetheless,
8 As one example, note the reform of the popular sector of Mexicos ruling party
mentioned in Chapter 5.

11
many informal institutions also govern interactions on ejidos and among ejidatarios
(members of ejidos).
Formal institutions of the public sector and informal institutions such as cultural
norms frequently share similar roots. Social interactions (informal institutions) often
become routine at the same time that formal institutions settle into the provision of
services. Both informal and formal institutions may influence the same transactions.
Informal patterns may be as important as or even more important than formal
organizations, and they often account for the discontinuity between proclaimed policy
goals and actual policies in practice. This is especially true in many areas of Latin
America, since informally institutionalized interactions are common in the region and
frequently of substantial significance.
Theoretical and Methodological Approach
In Chapter 2 a number of different theoretical approaches to the study of
institutions are reviewed. Ultimately, a historical institutionalist perspective is chosen
because it provides the most explanatory power, but the institutional analysis is also linked
to micro- and macro-level approaches. Historical institutionalists argue that institutions
have a significant effect on their environment. Institutions shape the thoughts, behaviors
and choices of individuals, as well as limiting the range of and speed of possible
environmental changes. The use of a historical institutionalist approach provides a way to
study the impact of large state institutions over time. Using this approach it is possible to
study subnational processes, structures and routines that transcend, outlive and therefore

12
outweigh the impact of particular politicians or other political actors. This is a very useful
means of studying the long-term impacts on development.
Chapter 3 furnishes a general discussion of the role of state institutions in Latin
America over time. A review of the role of state institutions during the era of the populist
Latin American state is followed by a general investigation into the significance of
institutional heritage during the execution of neoliberal reforms, periods most widely
characterized as times of change. During the decades of neoliberal reforms in Latin
America, scholars frequently emphasize the modifications to preexisting development
policies, thereby effectively underrating institutional continuities. This chapter will
provide evidence that it is precisely in the throes of such reforms that the influence of
historical institutions may become most consequential. A review of the anticipated
changes, the goals of neoliberal policies, and the progress of the reforms is made.
Evidence of the limits to the success of neoliberal reforms in Latin America is presented.
The delays to the success of neoliberal reforms may or may not be the result of
institutional effects. In order to descry whether institutional effects are indeed causally
significant, a closer examination of a particular case is necessary. The fourth chapter
provides background for a case study of Mexico that will provide insight into how
significant institutional effects are.
The significance of the role of historical institutions is best revealed through the
use of a case with many long-standing institutions. Mexico has the longest history of
political stability in Latin America, and is considered one of the closest followers of
neoliberal reforms. Since Mexico is such a useful case of overt continuity in a political

13
system, it provides an excellent window into whether state institutions have significant
influence even during neoliberal reforms.
The chapter begins with brief general background of the Mexican case from the
time of the Revolution. Key components include the formal and informal institutional
heritage of the Mexican Revolution, an introduction to Mexican corporatism and the
fusion of the official party and the state, and a description of the electoral cycle (the
sexenio). Neoliberal critiques of these institutions are provided. Mexican corporatism, for
example, is censured for promoting an economic and political order based on partisan (and
often corrupt) political loyalties rather than effectiveness or competency. This essential
background to the Mexican case is followed by an examination of specific evidence.
The evidence for these two key chapters is collected from a broad swath of
literature. A vast amount of high quality research is available on Mexico. This literature
was used as the source of information about the role of institutions during neoliberal
reforms. Analysis of this research was aided by insights gained during my previous
experience in Mexico (a total of more than a year between 1989 and 1994).
Interaction with other Latin Americanists in general and Mexicanists in particular
via email discussion lists has also proved invaluable to the interpretation of evidence.
Several members of the Scholars for Mexican Rural Development (MRD)9 have aided
particular aspects of this research, especially in conceptualizing institutions in the agrarian
^ The MRD Network provides the following information about itself: Scholars for
Mexican Rural Development (the MRD Network) was founded in January 1992 by
Theodore E. Downing (University of Arizona), as part of the ANTHAP network
developed by James Dow at Oakland University in Rochester, Michigan. It was
developed in response to the rapidly unfolding events in rural Mexico. In 1995, Gerardo
Otero, Simon Fraser University, joined Downing as the co-facilitator of the MRD.

14
sector. In addition, some data was obtained directly from Mexican agrarian institutions
through mail, email and telephone. For example, in the section on ejidos in Chapter 6,
data was obtained from the National Agrarian Registry (the Registro Agraria Nacional).
Mexicos communication systems have increased the opportunities to gain valuable insight
about local events even from a considerable distance.
Research relying upon secondary literature is a particularly valid methodology for
a study that attempts to answer the broad questions raised here. The issues lend
themselves very well to a qualitative research method, and one of the greatest challenges
to scholars conducting qualitative research is the attempt to remain objective. The use of
secondary data might even ensure a higher standard of objectivity than could be expected
if conclusions were based exclusively on qualitative evidence collected first-hand. Instead,
the observations of many scholars are collected and presented in a unified fashion.
A common thread among the observations of a variety of scholars on the interplay
of continuity and change, structure versus agency, institutions and the role of individuals is
demonstrated, yet what results is not merely a summary of the work of others. Instead,
the evidence collected here supports conclusions that frequently differ in important
respects. Simply put, while much of the literature emphasizes elements of change, this
study highlights continuities caused by institutional factors.
Chapters 5 and 6 provide evidence from Mexico about how and to what extent
state institutions affect the implementation of neoliberal reforms. The significance of a
number of both informal and formal institutions during the implementation of neoliberal
reforms in Mexico is documented. In Chapter 5, a reflection on the role of pacts as formal
embodiments of corporatism follows a discussion of corporatist institutions in general.

15
The impact of the Federal Labor Law on neoliberal reforms affecting the labor sector is
examined. In Chapter 6, an analysis of the role of the ejido is bolstered using primary data
gathered from the Mexican agrarian sector. The role of a variety of other institutions,
including the Mexican Workers Confederation (the Confederacin de Trabajadores de
Mxico or CTM), the National Peasants Confederation (Confederacin Nacional
Campesina or CNC), the National Front of Organizations and Citizens (Frente Nacional
de Organizaciones y Ciudadanos or FNOC), the Mexican Social Security Institute
{Instituto Mexicano de Seguridad Social or IMSS) and the Office of the Attorney General
for Agrarian Affairs or Office of the Agrarian General Counsel {Procuradura Agraria or
PA), is discussed. The National Solidarity Program {Programa Nacional de Solidaridad
or PRONASOL) and the Direct Rural Support Program {Programa de Apoyo Directo al
Campo or PROCAMPO) are also shown to be relevant in this study. A broad variety of
evidence from a number of different formal and informal institutions suggests that the
implementation of neoliberal reforms is being hindered and distorted by institutional
factors.
The final chapter is a discussion of the implications of this research, which extend
beyond simply the Mexican case or even Latin America. This examination and critique of
the practical implementation of development policies is conducted in the hopes of spurring
the refocusing, adjustment or advancement of development ideas and ideals. What does
the revelation of institutional effects imply for development in general? Institutions can
best aid development (or at least not hinder it) if their existence is acknowledged and
taken into account by policymakers. This study reveals the difficultyindeed, at times,
the apparent impossibilityof undoing certain institutions. It is unrealistic to expect such

16
institutions will simply disappear, therefore, policies that assume and require such a
possibility are doomed from the outset. As the 1999 United Nations Development
Program Human Development Report (1999:8) argues:
Economic policy-making should be guided by pragmatism rather than
ideologyand a recognition that what works in Chile does not necessarily
work in Argentina, what is right for Mauritius may not work for
Madagascar. Open markets require institutions to function, and policies to
ensure equitable distribution of benefits and opportunities. And with the
great diversity of institutions and traditions, countries around the world
need flexibility in adapting economic policies and timing their
implementation.
Institutional effects should be taken into greater account when formulating
development policy, whether free-market oriented or otherwise. As neoliberal policies are
implemented, they are sometimes adjusted to accommodate institutional variables into
development schemes, as the discussion of the ejido in Chapter 6 will reveal. These
adaptations can aid development by creating a better match between policies and their
environment. Yet this study will also reveal many ways that development is affected when
institutional effects are not adequately incorporated into policy making and policy
implementation. When this occurs, policy outcomes may differ vastly from those
originally envisioned by policy makers. This study concludes with a discussion of how the
effects of state institutions on neoliberal reforms impact development in general.

CHAPTER 2
IMPACTS OF INSTITUTIONAL FACTORS ON NEOLIBERAL
DEVELOPMENT POLICY: THEORETICAL SUPPORT
To add to an understanding of the implementation of development policies this
study focuses on the role of institutions. An institutional perspective provides a useful
lens through which to view issues of development policy implementation, since the neglect
of institutional effects leaves scholars with only weak understandings of political and
economic interactions. This chapter will first roughly distinguish institutional paradigms
from other ways of knowing and then delve into a survey and comparison of several main
types of institutional approaches. In the end, a historical institutional approach is
determined to be the most useful, because of the insights it can provide into how
institutions influence decision-making, thereby impacting development. The chapter
concludes with a discussion of how this mid-level institutional approach will be
complemented with insights gained from macro- and micro-level perspectives.
What is Meant by the Umbrella Term Institutional Approach?
Institutional approaches are distinct from other ways of studying political, social
and economic phenomena, which may be divided into three general paradigms: (1)
institutional approaches, (2) behavioralist / utilitarian approaches, and (3) social
determinist / Marxist approaches (Immergut 1998:12). These approaches have varied in
popularity over time. Institutional approaches are mid-level approaches to the study of
17

18
political, economic and social phenomena, whereas behavioralist / utilitarian approaches
are micro-level, and social determinist / Marxist approaches are macro-level. Although an
institutional approach is adopted here (as explained below), some linkages to the insights
of micro- and macro-level scholarship are made as well.
Within the field of political science, analyses of institutions dominated research at
the end of the 19th century and beginning of the 20th century. This old institutionalism
focused on constitutions and formal institutions of government, yet considered them to be
dependent, not independent, political variables. 1 The current renewal of interest in
institutions developed in reaction to the behavioralist revolution of the 1950s and 1960s
(Scott 1995:7). Behavioralist research focused on observable individual behavior, and
used this observed behavior to explain government. The institutionalist approach is
selected here because behavioral assumptions have the following weaknesses: (1) the
assumption that political behavior reveals preferences, (2) the assumption that the
aggregation of interests is efficient and unproblematic, and (3) the normative assumption
that institutions are therefore unbiased and just; social determinist approaches, on the
other hand, are repudiated for assuming that interests are objective and social class /group
based (Immergut 1998:6-8, 12).
This framework serves to distinguish institutional approaches from other types of
research in the social sciences, but reveals little about the diversity of institutional
approaches themselves, including rational choice, branches of organization theory
(sociological institutionalism) and historical institutionalism. This analysis will rely upon
1 See Eckstein (1963).

19
insights from several institutional approaches, but the historical institutionalist perspective
will be shown to possess the best explanatory power for approaching the study of the role
of institutions during neoliberal reforms.
Approaches to the Study of Institutions
Institutional theories vary considerably, especially on the autonomous explanatory
power they attribute to institutions. Important similarities exist in the cycles of popularity
of the study of institutions over time and across disciplines. In economics, sociology and
political science, the novelty of institutional approaches is debated. Most institutional
theories today are thrown under a label of new institutionalism / neoinstitutionalism,
although many scholars deny that much institutional analysis is new in theoretical content
(e g., Hritier 1998).
Many scholars have attempted to organize institutional theories into various
categories.2 Institutions and Organizations (1995) by W. Richard Scott is an example of
this type of literature, providing a concise guide to an abundance of overlapping literatures
on institutions. These scholars categorizations differ in important respects, but do have
certain similarities. New institutionalism challenges the research style of behavioralist
research (Olsen 1998). Most of the categorizations set one group of institutionalists,
rational choice theorists, apart from other groups. For this reason, this discussion of
institutional theories will examine the tension between rational choice and other
institutional approaches.
2 See, for example, Scott (1995), Thelen and Steinmo (1992), Resen (1998), Keman
(1998), Hritier (1998), Immergut (1998), Koeble (1995), Kato (1996), Ethington and
McDonagh (1995) and Klein (1994 [originally 1980]).

20
The study of the role of institutions is plagued by an ongoing tension. Institutions
and individuals are factors in systems where cause and effect are blurred by constant
interaction. The origin of motivation is sought in the ongoing question: Do institutions
motivate individuals to act in certain ways, or do rational individuals create institutions
according to utility-maximizing blueprints? In the attempt to pin down the source of
motivation, the analyst must often ignore certain contradictory effects. Yet scholars must
attempt the task, or risk gaining no insights whatsoever. The study of institutions,
therefore, has been approached from what may be viewed as two general starting points:
the individual or the institution. 3
Each of these initiation points provides a gateway to fruitful analyses. Yet even if
performed by the best of scholars, an infinite number of studies from just one of these
initiation points would still result in an incomplete depiction of reality. All theories must,
by their very nature, generalize. When two theoretical perspectives describe similar sets of
interactions, scholars should perceive the benefit to the academic field of continuing
research from each perspective when attempting to gain knowledge.4 The two theories
may fundamentally contradict each other, yet sound reasoning suggests that reality is best
understood through the use of the insights of both perspectives. In this manner, the best
use of institutional theories will be gained:
... [Pjrogress is likely to emerge by looking at bi-focal or tri-focal areas...,
which is not to be confused with academic fence-sitting... .to try to work
past the immediate obstacles to mix what may at first appear as oil and
3 For other ways of organizing the study of institutions see, for example, Resen (1998) or
Keman (1998).
4 Many scholars make this argument. See, for example, Immergut (1998), Resen (1998),
Kato (1996), Koeble (1995), Ethington and McDonagh (1995), etc.

21
water... When carefully handled, the perspectives allow for synthesis in
ways which have not yet been recognized. (Resen 1998:136)
Indeed, through the use of institutional studies, the outlines of a cumulative discipline may
finally be under the process of construction in political science (Ostrom 1995:179).
Lower-level perspectives (which begin with the individual) may be distinguished from mid-
and higher-level perspectives, which examine institutions and structures:
Instead of separate tables, we need to imagine ourselves working at
separate levels, all viewing a complex mosaic of recursive processes
occurring on multiple time-space fields. Those of us working at the lowest
level need the help of those who can see broader outlines. Those of us
working at a higher level need the help of those who can see how
individuals actually interact with one another to produce the higher-level
phenomena. In such a scientific house, there is no single level that provides
the best answer to all questions. Rather, one has to understand how
different levels provide better answers to some questions than others.
(Ostrom 1995:179)
This study relies primarily on a mid-level institutional perspective, historical
institutionalism. The historical institutional perspective links examinations of how
institutions influence decision-making and standard operating procedures (lower-level
phenomena) with discussions of the macro-consequences of that impact (higher-level
phenomena). When appropriate, however, the discussion is bolstered using insights from
approaches used in other levels of analysis as well .^ Before expanding on approaches that
emphasize the power of institutions, an examination of approaches that begin with the
individual is made.
5 As one scholar suggests, In fact, combining levels of analysis is necessary, because the
empirical object under study is, in fact, multileveled (Rothstein 1996:23).

22
Rational Choice
Rational choice or rational expectations approaches view institutions as the results
of conscious designs by rational individuals. Rational choice in political science is formal
theory first borrowed from work in economics on rational expectations (Lalman,
Oppenheimer and Swistak 1993:77). These assumptions are that all persons are rational
maximizers of self-interest, calculating the value of alternative goals and acting efficiently
to obtain what they want (Zuckerman 1991:45). A rational actor may be defined as an
actor making optimal choices in specified environments (Nurmi 1998:15). One
problematic aspect of this is that the boundaries of those environments for one person may
differ vastly from the boundaries of another, which means their choices may differ
significantly. A brief summary will clarify the different perceptions of the role of
institutions in the field of economics, and how the concept of rational choice changed
research in other fields.
Rational choice and institutions in neoclassical economics, neoliberalism and the
new institutional economics
Research utilizing a rational choice approach is extremely diverse, ranging from
free market conservatives to Marxists (Hauptmann 1996:1). The use of rational choice
originated in economics in response to the shortcomings of the (traditional) neoclassical
economics paradigm, as a basis for the New Institutional Economics (NIE) (Nabli and
Nugent 1989:1333). Neoclassical economics generally took the institutional framework as
a given, and in many cases ignored it altogether (Nabli and Nugent 1989:1335). In
reaction to this, an institutionalist school developed, creating a rough distinction between

23
classical mainstream / neoclassical economics and work in old / new institutional
economics.
Gruchy (1969) calls institutional economics dissent. Klein ([1978] 1994), on the
other hand, traces the historical development of institutional economics and argues that
this school does not deserve the title of mere dissent. The old institutionalist school was
shaped by Thorstein Veblen, John R Commons, Wesley Mitchell, Clarence Ayres and
other heterodox economists (Gruchy 1969:5-6). Some scholars maintain that early
interest in institutional economics faded, as Scott suggests:
.. .the early institutional economists did not prevail: Neoclassical theory
was victorious and continues in its dominance up to the present time. Prior
to the rise of the new institutional economics in the 1970s, only a few
economists attempted to carry forward the institutionalists agenda. .(Scott
1995:4-5)
Klein, on the other hand, argues that, Far from dying out, as some appear to
think, institutionalism must be viewed as either never having died or as being in the
process of a resurrection which I suggest will endure ([1978] 1994:27). The resurrection
Klein refers to has today become known as the new institutional economics. Kleins
assertion that institutionalism never really died out in one school of economics supports
the notion that the study of institutions is well-established, albeit not mainstream, within
the discipline of economics.
Gruchy distinguishes work by the old institutionalists from that of
neoinstitutionalists such as John Kenneth Galbraith (1967), Gunnar Myrdal (1956),
Adolph Lowe (1965) and others (Gruchy 1969:6). A main distinction between the two
groups was that the neoinstitutionalists were not heavily influenced by Thorstein Veblen,
and the perceived anti-theoretical technological determinism associated with him (Gruchy

24
1969:6). The new institutional economists attempt to merge theoretical insights from
neoclassical economics with the influence of institutions, to create a more relevant social
I science. Both the old and the new institutionalists within economics criticized neoclassical
economics for several reasons:
. .the two schools share a strong criticism of neoclassical economics for (a)
its lack of attention to institutions and hence to the relevance and
importance of nonbudgetary constraints, (b) its overemphasis on the
rationality of decision making, (c) its excessive concentration on
equilibrium and statics as opposed to disequilibrium and dynamics, and (d)
its denial that preferences can change or that behavior is repetitive or
habitual. (Nabli and Nugent 1989:1336)
Institutional economists explore a wide range of institutional effects. They might,
for example, detail the inefficiency of state-run organizations, and point out that such
institutions often limit development. For orthodox institutionalists,
the framework of analysis involves an examination of the tensions between
the dynamic force that promotes economic growth and development-
technological progressand the retarding, past-binding institutions,
socioeconomic structures, and their associated behavior and thinking
patternscalled ceremonialismthat tend to slow technological adaptation
and impede economic development. (Dietz 1995a: 16)
From the perspective of orthodox institutional economics, the inefficiency of many state-
run organizations is widely assumed, and the perseverance of such state institutions
despite reform attempts is therefore seen as a hindrance to development.
There are two general approaches within the new institutional economics: (1)
transaction and information costs, and (2) collective action (Nabli and Nugent 1989:1336-
1337). The transaction cost school grew out of work by Coase (1960) and was followed
by such authors as Williamson (1985) and North (1990). Its adherents argue that
economic performance depends upon the right institutions to lower the costs of
information, coordination and enforcement of contracts (Bardhan 1989:1389).

25
Neoinstitutionalist Douglass North (1990) adds depth to the discussion of the
influence of institutions on economic development over time by revealing the persistence
of inefficient institutions. His work qualifies the assumptions of the rationality of decision
making by insisting that the motivations of actors are more complex than usually assumed,
and that the institutional framework limits the set of choices available to them (North
1990:17-26). Norths path dependency approach grants significance to a states
institutional development, which helps to explain why some countries have persistently
poor performance over time.
Collective action approaches, the other general approaches within the new
institutional economics, reveal the free-rider problem, namely, that rational actors will
often choose not to help provide public goods. Olson (1965) and Hardin (1968) founded
this approach theoretically (Nabli and Nugent 1989:1338). Research in this school can
explain how sub-optimal public outcomes come about, as well as to help identify what sort
of institutional framework may assist in the provision of public goods.
The growth of the new institutional economics challenged the traditional
neoclassical economic paradigm. Nonetheless, neoclassical economic theory continued to
influence development policies throughout the 1980s and 1990s. It provided the basis for
the neoliberal policy recommendations being implemented in Latin America in recent
decades. Neoliberals take orthodox perspectives on institutions. They believe that
development will occur through the implementation of macroeconomic stabilization,
structural adjustment and the free flow of international trade and capital. Policy analysts
appear now to be moving away from some of the neoliberal prescriptions originally
recommended for Latin America, in order to pay closer attention to institutional theories

26
and their concordant policy recommendations. Two recent World Bank publications
(Burki and Perry 1997 and Burki and Perry 1998) make this shift explicitly. The authors
refer specifically to the new institutional economics as the perspective they adopt, and
distinguish it from the neoliberal perspective (which neglected institutional influences) that
was the basis for the Washington Consensus.6
Although the new institutional economics focuses needed attention on significant
institutional phenomena, it is inherently limited by the fundamental assumptions of
rationality which form the basis of their examinations. Nonetheless, the approach was
appealing because it brought a means of conducting research using formal, deductive
methods. The influence of neoinstitutionalists in economics soon had an impact in
scholarly research in other social sciences as well. This extra-disciplinary spread of its
influence is described in the next section.
Rational choice and institutions in political science and other fields
Rational choice approaches have become increasingly popular in political science
and other social sciences. By 1992, rational choice approaches were represented in 40
percent of the articles published in the American Political Science Review, the major
journal for political science (Pfeffer 1997:13). Scholars who recognize the limitations of
this approach should welcome the insights of other theoretical perspectives. Other useful
approaches are being underrepresented in the field of political science.
6 See Burki and Perry 1998:1-2.

27
Some examples of the leading scholarship applying rational choice theories to
political phenomena are Kenneth Arrows Social Choice and Individual Values (1963),
James Buchanan and Gordon Tullocks The Calculus of Consent (1962), Anthony
Downss An Economic Theory of Democracy (1957). Mancur Olsons The Logic of
Collective Action (1965) and William Rikers Liberalism Against Populism (1982).
Rational choice explanations posit that since institutions are created by, altered by and
eliminated by individuals, in order to understand political, economic or social phenomena,
scholars should focus on the motivations, decisions and actions of individuals (Zuckerman
1991).
Put somewhat differently, rational choice theories assert that institutions are for the
most part temporary in nature (Resen 1998). For this reason, the rational choice approach
lacks explanatory power when confronted with institutions that appear to contradict the
desires and plans of rational actors over extended historical periods. Although they
acknowledge that institutions can constrain actions, they have difficulty explaining how
such institutions could continue to affect outcomes. Unnecessary institutions are often
viewed as temporary or insignificant entities in the grand scheme of development policy
implementation. Rational choice institutionalists maintain that individuals should be
motivated to act to eliminate inefficient institutions in order to advance development.
Some of the fundamental problems with the rational choice approach are that:
... [A]n economic conception of choice cannot explain many things about
politics: how people form political allegiances, how they change their
minds about political issues, and why they adopt political positions on
issues that have little bearing on their own personal fortunes. Nor can
rational choice theory capture political situations in which institutions do
not offer citizens a defined range of options from which to choose. In such
situations.. the course people take cannot always be easily defined as the

28
product of a rational choice... [Rjational choice theorists particular
conception of choice.. .is also a central reason why their project to explain
politics in economic terms yields incomplete and distorted results.
(Hauptman 1996:89-90)
The normative implications of the rational choice institutionalist approach are that
the utilitarian standard (which posits that the sum of individual preferences will result in
the common good) creeps back in (Immergut 1998:15). Yet these approaches do not
deny the significance of institutions. Instead, institutions are perceived as capable of
constraining actions (Lalman, Oppenheimer and Swistak 1993:81). A problematic aspect
of one of the foundational premises of rational choice theory is that individual self-interest
may not be completely independent of the interests of others (Lalman, Oppenheimer and
Swistak 1993:97). Raising the issue of the possible interdependence of the interests of
individuals paves the way for deeper questioning of the roles of institutions.
If individuals are interdependent, what does their interdependence mean for their
preference formation? What might influence their choices? The role of institutions is
irrevocably significant. Approaches to political and economic issues that give greater
emphasis to the institutions themselves seem to be required, given these shortcomings of
rational choice approaches. Yet other new institutionalist approaches differ significantly
(Keman 1998:109). The two other main types of new institutionalism are sociological
(organizational) institutionalism and historical institutionalism.
Sociological / Organizational Institutionalism
The study of institutions in sociology experienced popularity beginning in the late
19th century. In recent decades, the resurgence of interest in institutions in other
disciplines has again focused attention on Emile Durkheim (1858-1917) and Max Weber

29
(1864-1920), whose work heavily influenced the subsequent development of sociological
institutional theories (Scott 1995:9). Sociological institutionalism has been roughly
divided into an old and a new institutionalism (see, e.g., Selznick 1996; Stinchcombe
1997). The distinction revolves around the extent to which human interactions may be
considered as driven more by self-interested actors or culturally defined procedures, as
explained below.
The two best-known early scholars of economic sociology are Durkheim and
Weber. The two figures had distinct impacts on the field of sociology:
. .Durkheim. ..essentially sought to bring sociological subject matter within
the confines of a positivist methodology. This methodology... principally
took the view that laws must be subject to the test of fact and thereby
stressed the criterion of observability. Accordingly, most of the
programmatic statements Durkheim made about sociological subject matter
tended to equate sociological events with external regularity and this may
explain Durkheim's use of the claim consider social facts as
things.. .Weber's work, on the other hand, emphasized the subjective side
of social action and in this respect knowingly rejected a methodology
which tended to equate social life with external regularities. (Morrison
1990:93)
Webers impact on economic sociology was to integrate the idea of interest-driven
behavior with the idea of social behavior in one and the same analysis (Swedberg
1998:3). Durkheims impact on the study of institutions provided support for the
exploration of the cultural dependency of human relationships, while Webers analytical
heritage is a blend of both culturally derived M>d self-interested behavior.
The heritages of Durkheim and Weber influenced both the old and the new
institutionalism. The old instiutionalists in sociology (like the old institutionalists in
economics) were also shaped by the work of institutional economists such as Veblen and
Commons (Stinchcombe 1997:1). Philip Selznick (1949, 1957) is one prominent example

30
of the old institutionalist school (Selznick 1996:270; Stinchcombe 1997:1). His work is in
the field of organizational analysis. Selznick explains that,
...institutional theory traces the emergence of distinctive forms, processes,
strategies, outlooks, and competences as they emerge from patterns of
organizational interaction and adaptation. Such patterns must be
understood as responses to both internal and external environments.
(Selznick 1996:270)
For Selznick and other old institutionalists, people built and ran institutions; this
may be contrasted with the new Durkheimian institutionalism in which collective
representations operate on their own (Stinchcombe 1997:1). Unlike work in political
science (and arguably, in economics), institutional theorizing in sociology did not lose
prominence from view during the behavioral revolution. However, when traditional old
institutional sociology came under fire, the growth of neo-institutional sociology began in
the 1980s. Both types of analysis now coexist in the discipline (Scott 1995:57-59). Neo-
institutional sociology, also known as the new economic sociology, includes work by
scholars such as Neil Fligstein (1990), Mark Granovetter (1992 [1985]) and Viviana
Zelitzer (1992)7
The new institutionalists in sociology should not be pigeon-holed as social
determinists. Nonetheless, these new institutionalists place greater emphasis on the
determinacy of institutions than, for example, the new institutionalists in economics do7
7 See Swedberg and Granovetter (1992), and Swedberg (1993 and 1998) for detailed
descriptions of work in economic sociology.
8 For example, Koeble explains that,
To the sociologists, institutions are themselves dependent upon larger
macro level variables such as society and culture, and the individual is a
largely dependent and rather unimportant variable. The quip that
economists attempt to show how people choose and sociologists try to

31
(The new institutionalists in sociology describe the embeddedness of social action and
situations of bounded rationality. The idea of the embeddedness of social action was
developed by Karl Polyani (1944) and expanded upon by Mark Granovetter (1992 [1985])
and Powell and DiMaggio (1991) (see Koeble 1995:234). Embeddedness refers to the
human tendency to stick to established routines, thereby affecting political, social, cultural
and economic life, making the idea of rationality absurd (Koeble 1995:235). 9 The
embeddedness of social action is an underlying concept in two significant edited volumes
among the new institutionalists in sociology: The Sociology of Economic Life (1992) by
Mark Granovetter and Richard Swedberg, eds., and The New Institutionalism in
Organizational Analysis (1991) by Walter Powell and Paul DiMaggio, eds.
Of special significance to sociological institutionalists are the concepts of bounded
rationality and satisficing developed by organization theorists (Cyert and March 1963;
March and Simon 1958; Simon 1957). Organization theorists challenged the empirical
validity of expectations of rational choice by arguing that members of organizations do not
choose among all possible outcomes, only among certain feasible or simple solutions to
organizational challenges. Rather than making optimal choices, members of organizations
make choices that usually only satisfy their needs. These concepts have proven useful to
many scholars of new institutionalism. Bounded rationality may be defined as the
show how people do not have choices to make still appears to hold true!
(Koeble 1995:232)
9 Koeble explains that,
Individuals are viewed as embedded in so many social, economic, and
political relationships beyond their control and even cognition that it is
almost absurd to speak of utility-maximizing and rational behavior in a
strictly economic sense. The very concept of rationality is dependent upon
its environment. (Koeble 1995:235)

32
inability of economic actors to anticipate properly the complex chain of contingencies that
might be relevant to long-term contracts (Granovetter 1992 [ 1985]:64).
James March and Johan Olsen (1989) promote the sociological institutionalist
approach by arguing that these and other organizational factors influence political
outcomes. In an earlier piece, they provide three examples of styles of theoretical research
on institutions: policy martingales, experiential learning and garbage can models
(March and Olsen 1984:745-746). Research on policy martingales seeks to reveal the
influence of chance in determining historical paths of development. Experiential learning
models expose how organizational learning influences future success, and how standard
operating procedures might interfere with optimal outcomes. Garbage can models
demonstrate the streams of influence flowing through organizations, with problems and
solutions joining spontaneously, or never coming together at all.
The work of sociologists Michael Hannan and John Freeman (1989) on
organizational ecology also examines the relevance of the historical development of
institutions. They provide evidence that the historical conditions present during the birth
and growth of institutions profoundly influence their future. In reference to this point,
Hannan and Freeman describe the strong influence of the work of Arthur Stinchcombe on
their own theoretical development. They explain that Stinchcombe (1965),
...suggested that cohorts of organizations are 'imprinted' with the social,
cultural, and technical features that are common in the environment when
the cohort is founded. Because imprinted characteristics are highly
resistant to change, the current characteristics of populations of
organizations reflect historical conditions at the time of founding rather
than recent adaptations. (Hannan and Freeman 1989: xiii)

33
Hannan and Freeman reveal the significance of this imprinting on a variety of
institutions.
These ideas from sociological institutionalism also found their way into scholarship
in political science. Dan Cochran is a political scientist who discusses the historical
imprinting of institutions and the impact of institutions on development. He describes the
relationship between an institutionalized regime and organizations, maintaining that a
regime creates,
... regularized patterns of interaction that maintain people in relatively
consistent relations over time. It must structure behavior... through
creating rules, beliefs, and relationships, many of which will be fostered by
and expressed through formal organizations. (Cochran 1994:18)
Cochran stresses the importance of institutionalization over the simple creation of
(weakly- or non-institutionalized) organizations in service to the state.
Rothstein (1996) similarly highlights the impact of organizational history on future
performance. He relates that,
As with other institutions, organizations may be viewed as frozen
ideologies. The norms, meanings, and goals which at one time had
furnished the reasons for establishing them remain embedded in the
organization long after these reasons have vanished. Organizations, as
other institutional arrangements, tend thus to a certain stickiness (March
and Olsen 1989; cf. Shepsle 1989). When an organization is established,
then, it is endowed with certain values, norms, repertoires, standard
operating procedures, etc., which will be very difficult to change in the
future (Jelinek et al. 1983; Olsen 1983; Selznick 1949, 10). (Rothstein
1996: 35-36)
The significance of frozen ideologies and institutional stickiness is discussed further in
the chapters that follow.
In sum, the old sociological institutionalism left some theoretical space for
individual rationality, although it emphasized many limits on rationality. The newer

34
sociological institutionalism, on the other hand, places so much emphasis on the limits to
rationality that it rejects the possibility that the sum of individual preferences will result in
the common good (Immergut 1998:15). This is similar to research on collective action in
the new institutional economics, which argues that rational actors will not always choose
to provide public goods. The development of institutional theories in sociology may be
viewed as a mirror image of the development of neoclassical economic ideas (Swedberg
1991: 22).
If one respects the intellectual acumen of scholars in each of these academic fields,
how is one to decipher the pendulum-swings in the acceptance of differing views of
institutions over time and across disciplines? Are the formal models of the economists
preferable due to their ability to distinguish the influence of the individual in social
modeling? Or are Durkheimian deterministic models of the new institutionalists in
sociology more useful since they unearth the impossibility of rational choice under a great
variety of common situations? Ostroms (1995) Resens (1998) and Rothsteins (1996)
arguments in favor of scholars working at different levels provide good resolution to this
apparent dilemma.
The institutional theorizing in political science known as historical institutionalism
helps to further resolve these issues. This perspective is best for the present institutional
study. As explained earlier, the insights from other perspectives will also fortify the
analysis on various occasions, especially when it pushes the limits of middle-level
(institutional, neither deterministic nor individualistic) analysis.

35
Historical Institutionalism
The new historical institutionalist school within political science is likened to the
old sociological institutionalism of scholars such as Selznick (1949) (Koeble 1995:236).
The contributions of Weber, and to a lesser extent, Durkheim, also influence historical
institutionalists. Institutionalist approaches vary in the significance they grant to the
influence of institutions on an economy, polity or society, but historical institutionalism
grants relatively more autonomous power to institutions than rational choice theories do.
It lends explanations that emphasize the legacies of institutions during development
processes (e g., Hattam 1993; Immergut 1992; Rothstein 1992 and 1996; Thelen and
/
Steinmo 1992). On the other hand, it stops short of suggesting that institutions vapidly
determine social outcomes.
The perspective of historical institutionalism is not always explicitly referred to by
scholars. Thelen and Steinmo (1992) provide a clear outline of this body of theory,
distinguishing it from and comparing it to the work of new political economists of the
rational choice school. Historical institutionalists focus on the importance of institutions
in forming and informing individuals choices, and how institutions in existence for long
historical periods can be very influential in shaping the thoughts of individuals (Thelen and
Steinmo 1992). Thus, the institutions that make up a particular environment over time
may have a more significant impact on development than the individuals living within that
environment at any one given time.
Historical institutionalization is the way that institutions take shape over time.
Institutions which have existed for decades are more entrenched, and thus more resistant
to change than newer institutions. Some state institutions may continue to function as

36
they have in the past, or in ways that reflect their historical development, rather than in a
reformed way advocated by current policies. Institutions with a long and significant
history may have a very different impact than newer institutions during a period of
reforms. Alternatively, new institutions may claim critical space.
Growth of historical institutionalism
Historical institutionalism, like other forms of new institutionalism, grew out of a
critique of the behavioralism of the 1950s and 1960s. Although some scholars did focus
on institutions during this earlier period, an enlivened debate about the role of the state
and its institutions was forged in the late 1970s and 1980s by scholars such as Peter Hall,
Peter Katzenstein, Theda Skocpol and Alfred Stepan. ^ These scholars emphasized the
significance of the state, state institutions and state-society relations in political economy.
Stepan, for example, describes a lack of institutionalization by the Peruvian
military regime from 1968-1975 (Stepan 1978:291-292). He defines institutionalization as
follows:
Institutionalization is a distinct process from that of installation and is not
just a matter of longevity. Institutionalization implies that a regime has
consolidated the new political patterns of succession, control, and
participation; has managed to establish a viable pattern of economic
accumulation; has forged extensive constituencies for its rule; and has
created a significant degree of...hegemonic acceptance in civil society. It
also implies that the majority of the weighty political actors in the polity are
pursuing strategies to further their positions within the new institutional
See Peter Hall, Governing the Economy: The Politics of State Intervention in Britain
and France (New York: Oxford University Press, 1986); Peter Katzenstein, Between
Power and Plenty (Madison: University of Wisconsin, 1978); Theda Skocpol, Bringing
the State Back In: Strategies of Analysis in Current Research, in Peter B. Evens,
Dietrich Rueschmeyer and Theda Skocpol, eds., Bringing the State Back In (Cambridge:
Cambridge University Press, 1985) and Alfred Stepan The State and Society: Peru in
Comparative Perspective (Princeton. NJ: Princeton University Press, 1978). See Thefgn
and Steinmo (1992) for a summary of the development of historical institutionalism.

37
framework, rather than directing their energies to resisting, eroding or
terminating that framework. (Stepan 1978:292)
By defining institutionalization in this fashion, Stepan emphasizes the autonomous power a
regime may possess: it is capable of control, establishes patterns and forges
constituencies. He draws attention to the role of institutionalization (i.e., the construction
of rules) in political-economic life.
Skocpol (1985) similarly emphasizes the role of the state in political-economy.
Like other historical institutionalists, she usually approaches the study of her subject
matter in an inductive manner. Skocpol, in Why I am a Historical Institutionalist
(1995), explains that in her 1992 book, 11 the patterns she tries to explain came to her
attention through empirical rummaging, not theorizing (Skocpol 1995:104). Similarly,
Thelen and Steinmo explain that,
Rather than deducing hypotheses on the basis of global assumptions and
prior to the analysis, historical institutionalists generally develop their
hypotheses more inductively, in the course of interpreting the empirical
material itself. The more inductive approach of historical institutionalists
reflects a different approach to the study of politics that essentially rejects
the idea that political behavior can be analyzed with the same techniques
that may be useful in economics. (Thelen and Steinmo 1992:12)
The unearthing of the evidence for this study of institutional impacts during the
implementation of neoliberal reforms similarly contributed in an inductive fashion to the
construction of subsequent hypotheses about institutional significance. The historical
institutional perspective provides the best support for both the qualitative examination and
the sub-national level of analysis used here.
11 Theda Skocpol, Protecting Soldiers and Mothers: The Political Origins of Social Policy
in the United States (Cambridge: Cambridge University Press, 1992).

38
Themes of historical institutionalism
What sorts of evidence do historical institutionalists uncover? The work of
historical institutionalists is diverse, with three prominent themes: preference
construction /political construction of interests," contextual causality and contingent
development" (Immergut 1998:20). Within each of these three types, some theorists
approaches are more structural and some are more interpretive (Immergut 1998). Each of
these three themes is reviewed in order to reveal what types of things historical
institutionalists work on, and to better compare this type of approach to the other new
institutionalist approaches discussed above.
Historical institutionalists who work on the political construction of interests do
not claim that norms dictate to actors what should be their behavior, but rather, that,
Instead, institutionsbe they the formal rules of political arenas, channels
of communication, language codes, or the logics of strategic situations
act as filters that selectively favor particular interpretations either of the
goals toward which political actors strive or of the best means to achieve
these ends. (Immergut 1998:20, emphasis added)
By understanding that institutions act as filters, historical institutionalists emphasize the
ways that they influence outcomes. This serves as a response to the criticism of non
institutionalists who argue that institutions do not have the capacity for autonomous
influence besides that originating in the organizations membership. This type of analysis
parallels work by sociological institutionalists on experiential learning described earlier.
Historical institutionalists also examine the contextual logics of causality, that is,
they tend to see complex configurations of factors as being causally significant
(Immergut 1998: 22,19). This means that the historical circumstances are important, and

39
makes generalization challenging, yet not impossible. Institutions are seen as providing J
the contexts in which individuals make decisions:
Mental constructs, economic and social institutions, and politics interact to
channel economic development along different paths, for instance, without
one necessarily being able to determine which of these elements is causally
primary or even to know whether the same combination would produce the
same results if repeated at a later point in time. (Immergut 1998 :19)
The examination of the path dependency of development by historical institutionalists is
similar to the work of neoinstitutionalist Douglass North (1990) as well as the work on
policy martingales among sociological institutionalists. The similarities between different
types of neoinstitutionalists are highlighted by this example. These path dependency
approaches do have subtle differences: Norths neoinstitutionalism begins with (qualified)
assumptions about the behavior of individuals, sociological institutionalism begins with
assumptions about the role of institutions, and historical institutionalists are eclectic, using
either a calculus approach or a cultural approach (Hall and Taylor 1996:939-940). *2
A third theme common in the work of historical institutionalists is that of
contingent development. By emphasizing the fortuitousness of political, economic and
social development, historical institutionalists are able to reveal how irrational outcomes
often come to pass. They show the difficulties of predicting future events with certainty:
Our understanding of particular events and developments is constrained by
the large role played by chance. Quirks of fate are responsible for
accidental combinations of factors that may nevertheless have lasting
effects. In addition, self-conscious political actors...can divert the
supposedly ineluctable march of progress onto unexpected paths.
(Immergut 1998:19)
According to a calculus approach, institutions provide actors with information that
affects their choices, whereas according to a cultural approach, individuals are seen as
satisficers who follow routines (Hall and Taylor 1996:939).

40
This theme in historical institutionalists study of contingent development also resembles
the sociological institutionalist research on policy martingales, as well as that on
garbage cans.
These three themes have many areas of overlap and scholars often articulate
several of them in a single piece of work. Skocpols research emphasizes the
contingencies of development (Immergut 1998:24), yet there are elements of the other
themes in her work as well. Skocpol adopts what she calls a polity-centered approach,
which draws attention to four types of processes:
One, the establishment and transformation of state and party organizations
through which politicians pursue policy initiatives. Two, the effects of
political institutions and procedures as well as social changes and
institutions on the identities, goals, and capacities of social groups that
become involved in politics. Three, the fit or lack thereof between the
goals and capacities of various politically active groups and the historically
changing points of access and leverage allowed by a nations political
institutions. And four, the ways in which previously established social
policies affect subsequent policies over time. (Skocpol 1995:105)
The first two processes fit the thematic category of the political construction of interests,
the third process approximates the theme of the contingency of development, and the
fourth process roughly matches the theme of the contextual causality. The examination of
the impacts of state institutions in Mexico (see Chapters 5 and 6) highlights similar
processes as those mentioned by Skocpol and draws attention to all three themes
described by Immergut. The relevant variables in historical institutionalist analyses are the
institutions themselves. Institutions influence decision-making, thereby impacting social,
economic and political development.

41
Policy Implementation Literature
This review of a broad spectrum of institutional perspectives has revealed some
similarities and differences in institutional approaches in a number of fields and across
time. Obviously, no such brief review could hope to really do justice to the vast literatures
that expound on the ideas of the leading figures in various theoretical areas. The goal,
rather, was to show the utility of institutional approaches, and to relate the perspective on
institutions used here to the work of others. Yet there is an important literature that has
thus far been excluded from the discussion, namely, the study of policy implementation.
Policy implementation is one of many approaches within the field of public
administration. The study of public administration was distinguished from the study of
politics by Woodrow Wilson in The Study of Administration (1887), and this dichotomy
has influenced research on adminstration and politics through the present time (Kettl
1993:407). Scholars regret that the divide between the two fields leaves each one
incomplete, and maintain that we should attempt to link them to overcome this problem
(see, e.g., Katznelson 1998:196; Kettl 1993:408).
The present research examines the impact of institutions on the implementation of
neoliberal reforms. Literature on policy implementation addresses the problems that arise
when instituting policies. Since the implementation of neoliberal reforms seemed to be
heavily influenced by political, institutional and bureaucratic factors, the institutionalist
approach will be supplemented with insights from the study of policy implementation. The
reason for doing so is to try to overcome some of the shortcomings that result when the
study of administration is divorced from the study of politics.

42
Policy implementation literature examines the compatibility between a given
policy and the specific state organization responsible for implementing it (Rothstein
1996:21). Studies of implementation stem from a Madisonian tradition in American
politics; this tradition is wary about too much governmental action, and they are cautious
about the concentration of governmentalespecially administrativepower (Kettl
1993:407). The study of policy implementation was formalized with the publication of
research by Jeffrey Pressman and Aaron Wildavksy (1973). ^ Pressman and Wildavsky
explain that,
The study of implementation requires understanding that apparently simple
sequences of events depend on complex chains of reciprocal interaction.
Hence, each part of the chain must be built with the others in view. The
separation of policy design from implementation is fatal. It is no better
than mindless implementation without a sense of direction. (Pressman and
Wildavsky 1979 [ 1973]:xxiii)
Implementation studies focus on the program as the unit of analysis rather than the
organization, as other types of public administration studies do (Kettl 1993:413).
The study of policy implementation evolved through three stages following the
publication of the pioneering work by Pressman and Wildavsky (1973) (Kettl 1993). In
the first stage, from 1973 through the mid-1980s, implementation literature focused on
government failure (Kettl 1993:414). The second stage literature argued that policy
implementation success was possible but context dependent (Kettl 1993:414). This stage
shares characteristics with the historical institutionalist literature emphasizing contextual
causality. Like the contextualists of historical institutionalism, these analysts had difficulty
13 Pressman, Jeffrey and Aaron Wildavsky (1979[ 1973]) Implementation: Or How Great
Expectations in Washington are Dashed Out in Oakland. 2nd ed., Berkeley and Los
Angeles: University of California Press.

43
in generalizing their findings. The most recent stage of policy implementation literature
examines in a more integrated fashion which conditions produce which type of results
(Kettl 1993:415).
Although the literature on policy implementation is useful when combined with the
insights of other types of analyses, on its own it suffers from certain shortcomings.
Implementational analysis lacks attention to the origins of power:
The problem with implementational analysis... is its myopic view of the
organizational problem and, more specifically, its failure to address more
general questions of the configuration of political power and social
structure in capitalist societies. (Rothstein 1996:31)
The micro-level of analysis of policy implementation studies can thus best be used as a
complement to mid- and macro-level approaches. Hall (1992) describes these three levels
of viewing politics. ^
Rothstein (1996) links these different levels of analysis in his examination of the
limits of political reformism in Sweden, revealing how different levels of analysis, ranging
from the macro- to the micro-level, can be used to study reformism. State theories, such
as theories addressing the relationship between state and society, are pertinent at the
macro-level (Rothstein 1996:21). At the mid-level and micro-level, institutional theory (or
organization theory) and implementation theory are appropriate (Rothstein 1996:21).
Both Rothstein (1996) and Hall (1992) combine insights from each perspective to form an
analysis that is solid and textured.
14 Rothstein (1996) differentiates, for example, between the (macro-) overarching level
of a market economy with a democratic polity, the mid-level organization of the national
political economy such as labor union organization, the structure of firms, party system
organization, etc., and the lowest level, namely, the standard operating procedures of
public and private organizations.

44
The conceptual linking between levels of analysis suggested by scholars such as
Hall and Rothstein works well for the present analysis as well. These macro- and micro
level analyses can be linked in a similar manner. From a macro-level, state-society
relations are described as corporatist, that is, the state has a relationship with vertically
organized societal groups that is defined by varying degrees of power and compromise.
Corporatist concepts about the relations between state and society explain the
administrative structure and capacity of the state and they are visible in the patterns and
behavior of specific state apparatuses (Rothstein 1996:33). In discussing empirical
details, reference is made to the impacts of corporatist institutions of the state (see
Chapters 5 and 6). This draws attention to the impact of macro-level structures (such as
the corporatist organization of state-society relations) upon more mid-level and micro
level structures and processes. For the mid-level of analysis, a historical institutionalist
approach is taken. Useful micro-level analysis is found in the study of policy
implementation.
A variety of insights from the study of policy implementation will add to the
interpretation of the empirical subject matter of this study at the micro-level. The capacity
to implement policies depends upon the legitimacy of the agency in charge of
implementation:
The very process of implementation can be the critical question, especially
if the policy takers are an organized interest group whose participation is
needed for successful implementation. One way of achieving this
legitimacy is to grant such groups semiofficial status (and not merely in
policy formulation, but also in implementation. (Rothstein 1996:37)
This explains how some groups become affiliated to the state, and subsequently impact the
success or failure of state policies. Thus incorporation may be used as a means of aiding

45
the successful implementation of policies. By contrast, then, alienating previously
incorporated groups might limit the success of new policies. This point becomes
significant when examining the relationship between political and economic liberalization,
as described in subsequent chapters. Although neoliberalism might call for alienating
certain privileged groups (in pursuit of political liberalization), the overall success of
implementing the reforms may sometimes (though not always) rely upon retaining
corporatist ties to key interest groups.
Another insight gained from the study of policy implementation is the relationship
between old agencies and new policies. Unless a new policy is similar to traditional
policies, a pre-existing organization will have difficulty implementing it, because it will
have to change its self-image as well as its traditional client groups in order to succeed
(Rothstein 1996:38-39). New agencies, by contrast, will have an easier time implementing
new policies. Similarly, the ideological orientation and professional norms of the
bureaucratic staff are important (Rothstein 1996:39). These themes gain significance
during the empirical discussions in Chapters 5 and 6.
Conclusion
The theoretical perspectives considered above address the impact of institutions
and agents on development policy implementation. The significance granted to institutions
per se varies considerably. For the present study, a historical institutionalist perspective
will provide the most meaningful insight into the outcomes of the implementation of
neoliberal development policies. By examining institutional context and institutional

46
power, the linkages between past, current and future developments are revealed and
insights are gained into whether new policy designs will result in their desired outcomes.
The need for research like this on institutions is succinctly described by
sociologists Hannan and Freeman:
We have expressed reservations about the power of efficiency in dictating
change in the world of organizations. Although we recognize that
considerations of efficiency have powerful consequences for many kinds of
organizations, we feel that they do not obviously override institutional and
political considerations. ...Theory and research that address these
connections are sorely needed. (Hannan and Freeman 1989: 339)
To better understand the interactions between the international, national, and
subnational influences on development, the present research will examine the impact of
institutions primarily from a mid-level of analysis using a historical institutionalist
perspective. Where neoliberal reforms fall short of their intended goals, the impact of
institutions on the implementation of reforms is studied. Historical institutions of the state
are shown to have significant impact on the speed and depth of reforms. Various
institutional perspectives are synthesized where analytically possible and logical,
emphasizing the strengths of those most applicable to the present examination. 15
The historical institutionalist approach used here begins with assumptions about
institutions. The analysis is also supplemented with insights from the macro-level of state-
society relations. Corporatist state-society relations create patterns of behavior visible in
state institutions. Micro-level analyses revealing how the beliefs of agents affect policy
implementation also bolsters the examination. For example, in Chapter 6, an explanation
See Rothstein (1996:23) for a defense of a similar approach linking Marxist analysis,
historical institutionalism and policy implementation approaches.

47
is provided as to how the beliefs of ejidatarios interact with the influence of ejidos during
the implementation of ejidal reforms. The tension between the neoliberal demand for
efficiency expressed explicitly at the national and international levels, and the reality of
political and institutional power at the subnational level will be exposed.

CHAPTER 3
STATE INSTITUTIONAL POWER DURING THE IMPLEMENTATION OF
NEOLIBERAL POLICIES IN LATIN AMERICA
This chapter provides a general discussion of the role of state institutions in Latin
America since the Great Depression. This historical perspective of the role of state
institutions moves through various development phases: from a discussion of import
substitution industrialization (ISI) through the crisis of the populist state and the spread of
neoliberal reforms. The goals of neoliberal reforms are examined and evidence of the
contraction of state institutions in the economic sector is presented. Yet the speed and
extent of the implementation of neoliberal reforms continues to lag behind original
expectations. This chapter begins to challenge the notion that certain neoliberal reforms
will soon achieve their goals, by pointing to noteworthy flaws that arise during their
implementation.
During the transformation to more neoliberal policies, some period of lingering
inefficient, weak and even contradictory policies is not surprising. Despite the
transformations of structural adjustment and liberalization, do some historical institutions
of the populist state continue to have an unexpectedly strong influence? Do other
institutions, although sharply curtailed by reforms, nonetheless leave heritages that
moderate the neoliberal project in a myriad of ways? Evidence of such institutional
stickiness will be considered, and the extensiveness and durability of such influences will
be further examined.
48

49
These questions delve into the meaning of the historical roles of both formal and
informal state institutions under the neoliberal project. Much literature from the 1980s
and through the mid-1990s presents the neoliberal project as one that will change (or is in
the process of changing) the role of state institutions quite rapidly under the strength of
neoliberal pressures. 1 However, at the turn of the 21st century, some analysts are
proposing a different outcome in the balance between state institutions and the market,
one that foresees the continuation of a very important role for the Latin American state in
national development.2
Beyond the question of whether some state institutions that contradict neoliberal
policy goals continue to thrive are other relevant questions. Are new institutions being
created to fulfill the informal commitments that the populist state has historically kept,
despite the fact that their new mandates essentially undermine parts of the neoliberal
project? Similarly, are older institutions being reborn with new names but identical
mandates?
This chapter will shed light on these questions by examining the status of the
reforms in a cross-section of Latin America. It argues that institutional phenomena limit
the successful implementation of neoliberal reforms. A historical institutionalist approach
provides the framework for this examination of development during the implementation of
neoliberal reforms in Latin America. The historical imprinting of institutions discussed by
Hannan and Freeman suggests a partial explanation for the abundance of state institutions
1 See, for example, Bergsten and Williamson (1994), Bhagwati (1991), Morales (1993),
Smith and Acua (1993).
2 For a discussion, see Burki and Perry (1998) and Bradford (1994).

50
deemed inefficient and / or inappropriate during the 1980s and 1990s in Latin America.
As will be discussed, historical imprinting is conspicuous on both formal and informal
institutions and affects the attempt to reform them. The applicability of a historical
institutionalist perspective to the present study is clarified using this general discussion
about Latin American state institutions as a starting ground. This chapter sets the stage
for a case study of one Latin American state (Mexico) to shed more light on the role of
institutions during neoliberal reforms.
Latin American Development Strategies and Institutional Heritage
Prior to the Great Depression, Latin America was heavily dependent on exports
for its economic growth. A succession of balance-of-payments crises resulted in a critical
rethinking of the conventional belief in the benefits of free trade, and the adoption of a
new growth strategy in the region (Dietz 1995a:9). The Great Depression had isolated
world markets, creating incentives for the development of domestic industries. The new
growth strategy was embodied in the ISI model of development.
ISI could be either horizontal or vertical (Dietz 1995a:9,10). Horizontal, or easy
ISI emphasized the domestic production of simple, nondurable, manufactured consumer
goodsfurniture, textiles, glassware, beverages and so onto replace those being
imported (Dietz 1995a:9). This type of ISI was especially popular as early as the 1930s,
and during this period many of the bureaucratic agencies of the state began to grow in
Latin America. In the creation of these institutions of public administration, European
concepts of public administration were matched with United States (U.S.) techniques such
as scientific management and other technical administrative skills (Graham 1990:35-36).

51
The characteristics of formal institutions were imprinted even earlier than is readily
apparent upon first examination (Graham 1990).^ After the 1930s, the involvement of the
state in development grew rapidly.
In the early decades of horizontal ISI, the region enjoyed a growth in
industrialization, but the strategy had inherent limitations, since domestic markets were
limited (Dietz 1995a: 10). At this time, the scholarship of Ral Prebisch, the first director
of the United Nations Economic Commission for Latin America (ECLA) gained
significance.^ In the 1940s, Prebisch formulated a concept of unequal exchange in the
trade relations between developed countries at the center of the world economy and
developing countries at the periphery (Prebisch 1950). According to Prebisch, the
countries that industrialized first enjoy an advantage that is perpetuated over time.^
Peripheral countries supply raw materials to central countries at ever deteriorating terms
of trade. According to this hypothesis, the world economic system is characterized by a
hegemonic relationship of the center over the periphery. To break this hegemony, price
protections for primary products were necessary along with rapid industrialization of the
periphery (Love 1995[1980]:112).
In an effort to break out of this relationship, after World War Two the second
stage of ISI, vertical ISI, had begun (Dietz 1995a: 10). Vertical ISI was adopted by larger
3 For the case of Mexico, which has had a very stable political system since the Mexican
Revolution in the early 20th century, state institutions are organized and operate in ways
that often reveal roots predating World War Two.
4 The name of the ECLA was later changed to the Economic Commission for Latin
America and the Caribbean (ECLAC).
5 For a discussion, see Ocampo (1995 [1993]).

52
countries (Argentina, Brazil, Chile and Mexico), to encourage the production of
intermediate and capital goods (Dietz 1995a: 10). Many formal state institutions became
more heavily involved in the economy at this time. Formal and informal state institutions
created during the period were thus imprinted with characteristics suited to the ISI model.
For example, corporatist and clientelist institutions rewarded particular groups and
individuals that were instrumental in promoting industrialization. Some of these
institutions were more adaptable to the changing needs of states over the decades, while
others stagnated in their original functions.
As vertical ISI policies continued during the 1950s and 1960s, ECLA and the
World Bank encouraged development planning, and the Alliance for Progress^ urged
agrarian and tax reforms (Gerchunoff and Torre 1992: 259). The states ability to
intervene in national development to the extent that it did during the era of import
substitution attests to the enormous capacities of the state in Latin America at the time. In
order to direct the economy, the Latin American state:
invested heavily in the kind of infrastructure required by industry, such as
new roads, water and electricity supplies;
kept labour costs down in urban areas by subsidizing basic foods and
imposing price controls
protected local industries against foreign competition by imposing import
taxes and non-tariff barriers such as import quotas;
6 The Alliance for Progress was a U.S. assistance program for Latin America implemented
by the Organization of American States which ran from 1961 to 1973. Goals included the
reduction of poverty, increased social equity, economic and social planning as well as anti
communism. Commitment to the Alliance was lacking both in the U.S. and in Latin
America.

53
nationalized key industries such as oil, utilities and iron and steel, and
established new ones. This produced a large state sector, intended to play
a leading role in developing the economy;
supported an overvalued exchange rate, making Latin Americas exports
expensive and imports cheap. This hurt exports, but helped industry by
reducing the price of imported machinery and inputs, while tariff and non
tariff barriers ensured that the relative cheapness of imports did not
undercut their products. An overvalued exchange rate also kept inflation
down by ensuring cheaper imports. (Green 1995:16-17)
This enormous role for the state came under attack under neoliberalism. The ISI model
contained some inherent economic flaws. ^ These flaws were the focus of growing
criticism from the 1970s onward. In the 1990s, such state-led development policies may
appear to have been overly reliant on political, rather than economic, incentives to
development. Given the strength of the current neoliberal consensus, such plans today are
discarded as recipes for stunted national development in the long term.
What was the actual result of the application of this advice? Conclusions vary
depending upon the observer. Evidence shows that in terms of economic growth, post-
World War Two performance was in fact quite remarkable (Teitel 1992). As one analyst
acclaims, During the period 1950-80, Latin Americas gross domestic product (GDP)
increased at an average yearly compounded rate of 5.5 percent, a performance not
significantly surpassed by any other group of countriesdeveloped or developing (Teitel
7 The inherent economic flaws have been elaborated by Dietz:
Latin Americas model of growth and development.. .depended for its
dynamic on a relatively small proportion of the domestic population with
sufficient disposable income to purchase the output of the promoted
industries, an output often of lower quality and higher price than the
foreign substitutes suppressed by the high tariff barriers of ISI. The
inherent growth limits of this strategy as a motor of development, absent a
more equitable distribution of income, are indisputable. (Dietz 1995a: 11)

54
1992:356). The diversification of Latin American economies and the creation ofjobs and
income that resulted from the use of ISI has also been lauded (Alexander 1995
[1990]: 165). For example, ISI policies developed textile industries throughout the region
(Alexander (1995 [1990]: 164). Economic indicators for Latin America and the Caribbean
(from 1950 through 1997) are shown in Table One. Table One reveals that both overall
GDP growth rates and per capita GDP growth rates during the decades of ISI compare
favorably with the corresponding growth rates of the decades of neoliberal reforms.
The development of Latin American markets during the period since 1950 may be
compared to the development of United States markets between 1870 and 1910, one of
the most dynamic experiences in worldwide capitalist development (Tokman
Table One: Latin America and the Caribbean: Economic Indicators by Decade
since 1950
(In percentages)
Decade
Leading Economic
Development Model
of the Decade
GDP Growth
Inflation
Foreign Trade
Overall
Per capita
Exports
Imports
Annua
rates of variation
1950-1959
ISI
4.9
2.1
17.8
4.0
3.2
1960-1969
ISI
5.7
2.8
21.6
4.5
4.1
1970-1979
ISI
5.6
3.1
37.9
2.6
7.8
1980-1989
Neoliberal
1.7
-0.4
203.4
5.4
0.0
1990-1997
Neoliberal
3.2
1.4
160.7
9.1
14.2
Source: Economic Survey of Latin America and the Caribbean 1997-1998, United
Nations, Santiago, Chile, 1998, pp. 346, 350, 355, 360, 365.

55
1993:131)Employment absorption in modern nonagricultural sectors grew rapidly in
each area. In Latin America between 1950 and 1980 growth in employment in modern
nonagricultural sectors was 4.1 percent per year (with manufacturing reaching 3.5 percent
per year), whereas in the U S., employment in modern nonagricultural sectors grew at 4.4
percent per year between 1870 and 1910(Tokman 1993:131).
Critics of the ISI period often point to the lack of development in industry /
manufacturing sectors. Yet the comparison with a similar period of development in the
United States reveals that Latin America is not as unique as is sometimes believed
(Tokman 1993). The development of employment in the manufacturing sector was
actually similar in some ways to the earlier experience of the United States,
Between 1950 and 1980 employment in the secondary sector in Latin
America declined from 42 percent to 39 percent of the nonagricultural
labor force. Between 1870 and 1900 secondary employment in the United
States dropped from 50 percent to 48 percent. This means that the decline
of secondary employment, as well as the sharpness of this drop, is not
peculiar to Latin America, as believed in the past (ECLA 1966). (Tokman
1993:132)
Scholars who do criticize the economic development of the period argue that the
gains during the decades of the 1950s and 1960s came at the expense of future
competitiveness of the region during the 1970s and 1980s. 9 As Table One has shown, a
^ A similar type of comparison of some Latin American countries during the 1960s to the
United States during the 1880s is also made by Merkx (1991). The percentage of the
population employed by the primary sector (basically agriculture) is around 50 percent for
Brazil, Mexico and Peru during 1960 and for the United States during 1880 (Merkx
1991:159).
9 For example, Deepak Lai argues that among large debtors, especially in Latin America,
the domestic problems these countries face in raising the requisite
resources for debt service and converting them into foreign exchange.. are
due to their endemic fiscal problems and dirigiste trade control systems that

56
sharp downturn in overall GDP growth occurred in the 1980s, with a negative per capita
change in growth for the region as a whole. Critics maintain that several decades of ISI
created nationally-subsidized industries that were inefficient and could not compete
internationally, and that such industrial growth created short-term gains at the expense of
long-term prosperity and economic stability. Politically, they argue, ISI empowered
sectors and individuals close to the ruling party, thus undermining the development of
democratic politics throughout the region. The impact of this historical period is still
being experienced. With the hindsight of the late 1990s, the shortcomings of the period of
ISI development seem in significance to be matched by the shortcomings of the neoliberal
reforms that followed.
The Latin American populist state took a variety of forms in the post-World War
Two era. Despite variety in the style of governmental leadership, in general the state was
fairly strong and active, taking responsibility for national economic development through
ISI policies. The assessment of institutionalized political capacity is relevant to the
evaluation of development in the region at the time.
State capacity includes many features. State capabilities are the basic
administrative and coercive functions of the modern state (Mauceri 1995:10). Three
arenas of state power exist: the states own organizational structure, the states ability to
influence the behavior of societal actors, and the states relation with other states and
supra-state actors (Mauceri 1995:10-11). A variety of indicators of state power exist,
including: state administrative presence; the ability to regulate the economy and administer
have created repressed and inflexible economies. (Lai 1994:199 [Reprinted
from Lai in Barry and Goodin, eds., 1992.])

57
state economic resources via fiscal and monetary policies (e g., taxation); administrative
autonomy; public enterprises; regulatory agencies; state capacity to maintain and repair
basic infrastructure (such as transportation, communication and energy networks); human
infrastructure; state bureaucracy; the ability to reshape society (e g., via agrarian reform);
a system of corporatist organizations to encourage societal participation (Mauceri cites
SINAMOS, a Peruvian state agency designed to support social movements); the ability of
a state to repress challenges to its power; and the ability of a state to maintain a strong
position internationally (e g., to avoid having international lending agencies dictate
domestic policies) (Mauceri 1995:11-15). Although these indicators are not quantified,
this list provides a way of thinking about the institutionalization of the political capacity of
the Latin American state.
To complete the definition of institutionalized political capacity, informal
institutions must also explicitly be encompassed, since informally institutionalized
interactions are common in Latin America. Institutionalized political capacity thus refers
to the consolidation of control through both formal and informal means. The definition of
institutionalization provided by Stepan (1978) is relevant here, as discussed in Chapter 2.
A regime has institutionalized political capacity if its goals are supported by formal
institutions such as laws, regulations and contracts, as well as informal institutions such as
trust, ethics / values and political norms (Burki and Perry 1998:12). The strengths of both
formal and informal institutional political capacity in many Latin American countries make
them important factors to consider in any study of development policies in the region.
During the ISI period, Latin American institutionalized political capacity
strengthened considerably. The state nationalized key industries, gaining control over vast

58
resources. Latin American states distributed these resources in a populist fashion over
several decades. These states strengthened their corporatist and clientelist ties with
organized groups and influential individuals. In Mexico, for example, the state used
import licensing and the licensing of interest groups to gain governmental control, and the
state mushroomed. The ISI period created state institutions for power over the
distribution of permits, tariffs, rules and regulations. The number of public servants grew,
and the state eventually generated approximately one-third of national economic activity
(Grayson 1998:29).
Although it is difficult to generalize about the extent of state institutional capacity
in Latin America because of national diversity, by the 1970s, many Latin American states
had penetrated society and had well-developed coercive and administrative infrastructures
(Grindle 1994:307). A number of Latin American states experienced military coups
during the 1960s and 1970s, but these new military regimes in Argentina, Brazil, Chile,
Peru and Uruguay were more institutionalized than earlier personalistic military regimes.
They were labeled bureaucratic-authoritarian states (ODonnell 1973). Other states,
such as Colombia, Costa Rica and Venezuela did not experience military coups. In these
states, organized labor was incorporated through the political party system (Wiarda
1995b:75). Among both bureaucratic-authoritarian and more liberal regimes in Latin
America, institutionalized political capacity during the period of ISI may be compared
positively to that of other developing areas at the time. ^
1 For example, in Africa at the time, on the other hand, the political capacity of the
postcolonial state was weak. In general, African states had a bloated administration but
few deep connections with society. One reason for the distinction is the African states
lack of resources when compared to their Latin American counterparts.

59
In terms of social performance the development picture is also somewhat clouded,
since the determination of social indicators of development is also quite subjective. Little
consensus exists over which indicators are most important, data from any developing area
are subject to serious shortcomings in terms of reliability and older historical data are
fraught with even more deficiencies. Nonetheless, the customary portrayal of Latin
American social development during the 1950s through the 1980s is overly dour (Teitel
1992). If one examines such indicators as life expectancy, nutrition, adult literacy,
university or tertiary education and others, Latin Americas social development under the
ISI period ranks better than or similar to other developing areas (Teitel 1992: 360).
Social indicators such as life expectancy, infant mortality and illiteracy rates show
positive changes during the ISI period (Lustig 1993:69). Despite structural flaws in Latin
American economies, although in different and unfair proportions, major social sectors
managed to improve their living standards during the whole postwar period until the
1980s (Sunkel 1993:41). During the 1960s the proportion of households below the
poverty line declined (Lustig 1993:668-69). Latin American schooling and nutrition also
improved during the ISI era (Lustig 1993:69-70).
In sum, the period of state-led development in Latin America coincided with high /
rates of GDP growth and average or better than average social development when
compared with other developing areas (Alexander 1995 [1990]; Brachet-Marquez 1994;
Grindle 1994; Lustig 1993; Sunkel 1993; Teitel 1992). Given that the assessments of
development in Latin America in the decades following World War Two are varied and
frequently quite positive, why did so much of the region switch its overarching
development model during the 1980s? What factors led to these broad policy shifts?

60
The answer for Latin America may best be understood with the aid of a historical
perspective on economic development after the 1960s, particularly in viewing the
difficulties which came to light in 1981/1982 with the onset of the debt crisis. The ISI
model began to falter after the 1960s, when many of the most obvious substitutions had
already been accomplished (Alexander 1995:159). Yet even during the years following the
first oil shock in 1973, many countries borrowed heavily, enjoying low interest rates on
loans for development.
As early as the 1970s, a consensus about the importance of market-oriented
reforms was growing ( Valds-Ugalde 1996:57). With the onset of the second oil shock
in 1979, however, credit tightened and free-floating interest rates soared. 11 Latin
American states continued to borrow despite the high interest rates attached to loans.
This continued until 1982, when Mexico declared a moratorium on its debt payments.
Credit became completely unavailable, forcing Mexico and other Latin American states to
cut spending in response to the demands of Bretton Woods lending institutions. To
qualify for the receipt of loans from the IMF and the World Bank, states had to adopt
economic stabilization programs followed by structural adjustment programs (SAPs).
Neoliberal policies were the recommended solution to the economic problems faced by
Latin America and other developing areas, as explained below.
The Spread of Neoliberalism
Latin Americas apparent widespread acceptance of neoliberal national
development policies (beginning with Chile in the 1970s) represents a major switch from
11 For a discussion, see Teitel (1992).

61
its state-led development policies implemented after the Great Depression. In the early
1980s structural adjustment programs brought pressure to reform many state institutions.
The size and number of state institutions has already been cut and / or is still being cut in
many countries.
As introduced briefly in Chapter 1, neoliberal recommendations included adjusting
domestic economies, reducing barriers to free trade and slashing the involvement of the
state in the economy. Neoliberal theories advocated fundamental changes in the roles of
state and market. Dietz critically summarizes the neoliberal perspective as the apparent
generalized...assertion that state intervention into the economic sphere is by nature
inefficient and incapable of positively contributing to the development project (Dietz
1995b: 192). His criticism is harsh, and may be valid for only a handful of the most
extreme neoliberals, but it does capture the spirit of the strongest critics of the Latin
American populist state. After the debt crisis, neoliberal views gained force and IS1 lost
credibility:
The consensus post mortem view held the whole complex of import-
substitutions policies responsible for what was essentially a crisis of
overspending exacerbated by the fickleness of international capital markets.
It became commonplace to view the debt crisis as the consequence of
import-substitution (inward-oriented) policies. The intellectual ground
was therefore cleared for the wholesale reform of prevailing policies in
Latin America, Africa, and Asia. Orthodox economists who had the ear of
policy makers now had their chance to wipe the slate clean and mount a
frontal attack on the entire range of policies in use. (Rodrik 1996:16-17)
The fall of the Iron Curtain and the breakup of the Soviet Union in the late 1980s and
early 1990s added further support to the idea that the market is far better suited to drive
an economy than is the state. The expectations were that the change in state influence
would cut the incidence of corruption and other non-democratic practices, since economic

62
assistance would not be tied to partisan or clientelistic relations with certain sectors or
firms. Neoliberal views were prominent in the United States government, the U.S. Federal
Reserve Board, and the IMF and the World Bank (Nazmi 1996:5).
Neoliberal ideals were embodied in what became known as the Washington
Consensus. 12 The Washington Consensus was formally identified following a 1990
conference sponsored by the Institute for International Economics in Washington, DC.
The conference gathered together a group of Latin American and Caribbean (LAC)
policy-makers, representatives of international agencies, and members of academic and
think-tank communities (Burki and Perry 1998:1). In response to development needs at
the time, Washington had reached consensus on the following policy instruments: (1)
fiscal discipline; (2) public expenditure priorities; (3) tax reform; (4) financial
liberalization; (5) free exchange rates; (6) trade liberalization; (7) direct foreign
investment; (8) privatization; (9) deregulation; and (10) property rights (Williamson
1990). These ten recommendations are sometimes referred to as the ten commandments
(Nazmi 1996:6).
To what extent did these neoliberals underemphasize the significance of
institutions? With the perspective of around a decade of policy reforms according to
neoliberal (Washington Consensus) ideals, two World Bank discussion papers^ conclude
12 Economist Nazmi also uses the Washington Consensus to identify neoliberal policy
recommendations (Nazmi 1996:5).
13 See Shahid Javed Burki and Guillermo E. Perry, (1998) Beyond the Washington
Consensus: Institutions Matter. Washington, DC: World Bank, Latin American and
Caribbean Studies Viewpoints Series; and Shahid Javed Burki and Guillermo E. Perry,
(1997) The Long March: A Reform Agenda for Latin America and the Caribbean in the

63
that institutions matter more to development outcomes than originally assumed. They
rightly note that,
With but one exception (namely, the protection of property rights) the
policy prescriptions of the Washington Consensus ignored the potential
role that changes in institutions could play in accelerating the economic and
social development of the region... (Burki and Perry 1998:1)
The Washington Consensus generally neglected the myriad ways that institutions affect
the implementation of neoliberal reforms, be they positive or negative for development.
State institutions were generally perceived as limits on reforms that could be overcome in
the short term. The Washington Consensus viewed institutions more as hindrances to
development than as entities that might decelerate and distort neoliberal reforms.
Through the mid-1990s, neoliberals were confident about the eventual outcome of
their policies. In 1994, the mood of policy-makers and investors in Latin America was
very positive; Burki and Perry explain that, Doubters and skeptics were a small minority
and their voices were drowned out by the crescendo of the alleluia (Burki and Perry
1997:ix). This changed significantly after the Mexican peso crisis of December 1994,
which threatened investors in other parts of Latin America and other developing areas as
well.
In The Long March (1997), Burki and Perry provide a detailed analysis of the
recent status of reforms in Latin America, as well as a reform agenda for Latin America
for the next decade. They refer to first generation and second generation neoliberal
Next Decade, Washington, DC: World Bank, Latin American and Caribbean Studies
Viewpoints Series.

64
reforms, and explain that following the implementation of first generation reforms
(through the late 1990s),
... there is now a general awareness among policymakers that additional
reforms need to be undertaken if LAC economies are to grow more than 6
percent a year.. Policy makers also believe that many of the reforms
vaguely referred to as second generation reforms are different from, and
more problematic than, the first generation reforms. (Burki and Perry
1997:x)
The second generation of reforms moves beyond the neoliberal reform goals of the
Washington Consensus. Reform goals now include a deeper attention to the potential
contributions of institutions to the reform process. As the same authors summarize in
Beyond the Washington Consensus: Institutions Matter (1998):
The Long March concluded, then, that further reforms were needed to
achieve higher sustained rates of growth and to make a more significant
dent in poverty reduction. It identified, in particular, the need to focus on
improving the quality of investments in human development, promoting the
development of sound and efficient financial markets, enhancing the legal
and regulatory environment (in particular, deregulating labor markets and
improving regulations for private investment in infrastructure and social
services), improving the quality of the public sector.. and consolidating the
gains in macroeconomic stability through fiscal strengthening. The report
showed that such reforms would entail considerable institutional reforms.
(Burki and Perry 1998:1-2)
Thus the second generation of reforms involves attention to institutions previously
left out of first generation reforms. Indeed, the Washington Consensus did not anticipate
that the role of institutions would prove to be so significant to the resolution of
development problems. This has been a fundamental flaw in its implications for
development. Neoliberal theories about development have tended to overlook potentially
significant institutional effects. In later chapters (5 and 6), state labor and agrarian
institutions, public sector institutions and other types of institutions mentioned by Burki

65
and Perry are discussed, to show how they have impacted the implementation of neoliberal
reforms.
Neoliberals have also been focused disproportionately on economic growth as a
desired outcome. Burki and Perry explain that:
The expectation, however, was not only that globalization and the first-
generation reforms would raise economic growth rates, but that they also
would significantly reduce poverty and inequality. Indeed, capital inflows
and export growth were expected to promote the development of labor-
intensive sectors. This has not occurred. (Burki and Perry 1998:1)
Hence, in the search for a deeper understanding of development problems and possible
solutions in Latin America, neoliberal policies appear to have misread both: (1) the
potential persistence of state institutions which may hinder neoliberal reforms, and (2)
the potentially negative development outcomes that could occur if, as a result, neoliberal
reforms were implemented in a distorted fashion. Before turning to an investigation of the
role of institutions during the implementation of neoliberal reforms, a general evaluation of
the success of neoliberal reforms in the achieving their objectives is provided. The
remainder of this chapter examines evidence from a variety of sources on Latin America.
The Emphasis on Change in Literature about Neoliberal Reforms
Much of the literature about neoliberal reforms in Latin America highlights
elements of change at the expense of a more balanced presentation of both continuity and
change during the period of reforms. For example, Edwards (1995), like many other
scholars, puts great emphasis on aspects of change during this period.14 He explains that
14 See for example, Andr Lara Resende, Moderator, Policies for Growth: The Latin
American Experience (1995); Guillermo Perry and Ana Maria Herrera, Public Finances.
Stabilization and Structural Reform in Latin America (1994); Jorge A. Lawton, Ed.,

66
early neoliberal reforms were numerous, and groups 22 Latin American countries as early
reformers, second-wave reformers, third-wave reformers, and nonreformers (Edwards
1995:8). Within each wave, reformers move through phases of initiation,
implementation and consolidation (as described by Haggard and Kaufman 1992) (Edwards
1995:9). By denominating countries as reformers, he implies that elements of change
are the defining characteristics of the development arena in these countries (Edwards
1995).
Edwards summarizes the status of neoliberal reforms in Latin America in a way
that exemplifies the literature highlighting elements of change. He reiterates the attitudes
of many analysts, noting that,
The Latin American reforms of the 1980s and early 1990s are impressive.
Most countries opened up their economies to international competition,
implemented major stabilization programs, and privatized a large number of
state-owned firms. Toward mid-1993, analysts and the international media
were hailing the market-oriented reforms as a success and proclaiming that
some Latin American countries were on the way to becoming a new
generation oftigers. (Edwards 1995:6)
Perhaps one of the most emphatic claims about reforms bulldozing preexisting
institutions is found in a recent examination of Bolivia (Toranzo Roca 1996). In this
chapter, Toranzo Roca argues that neoliberal reforms not only changed economic policies
but also transformed political thinking and historical beliefs:
The New Economic Politics approved of in August 1985 was also the
beginning of a new strict programme of structural adjustment, and it also
Privatization Amidst Poverty (19941: Carlos F. Toranzo Roca (1996) Bolivia: Crisis,
Structural Adjustment and Democracy, in Alex E. Fernndez Jilberto and Andr
Mommen, eds., Liberalization in the Developing World: Institutional and Economic
Changes in Latin America. Africa and Asia. London and New York: Routledge.
* 5 Nonreformers include the Dominican Republic, Ecuador and Haiti (Edwards
1995:7).

67
turned into the first phase of the structural reforms which changed the
orientation of the economy: Much more than all that, and surpassing the
categorical scaffolding used by the international financing organizations,
one could assert that with these new economic politics the societal
organization of the country was being redesigned and, simultaneously, that
its politics, the state, the political system and its articulation with the
political actors would be redefined.
The New Economic Politics.. caused political and ideological
transformation as well, because it had the capacity to change the old
political concepts.. the old categories of the syndicalist and left-wing
radicalism were exorcised from the peoples minds. (Toranzo Roca
1996:166-167)
Toranzo Roca argues that the Bolivian public was ready for a new ideology after the
failure of previous economic policies (Toranzo Roca 1996:166). Yet he leaves the reader
with no sense of the other side of the development picture, namely, whether any elements
have remained unchanged, and if so, the reasons for their continuity. (Further discussion
of the Bolivian case appears in the next section.)
Another powerful example of work emphasizing elements of change rather than
continuity is Roberts and Araujos The Capitalist Revolution in Latin America (1997).
The authors declare,
As the twentieth century enters its final years, Latin America is enveloped
in tumultuous change. Countries that had for decades relied on socialist
development planning and inward-looking protectionist policies privatized,
deregulated, and opened their economies to global trade... ,[T]he new
political leaders burned their bridges to the old order.... From Mexico to
Argentina, governments subjected themselves to standards of truth,
morality, and justice, elevating the rights of the individual over privileges
that had been seized by the state. The outcome of the reforms is a rebirth
in all areas of life: economic, political, social, and spiritual. (Roberts and
Araujo 1997:10)
Their emphasis on change leads them to overstate the speed and extent of reforms to date.
By describing changes as burned bridges and rebirths, they cast aside possible impacts

68
of institutional continuities. Indeed, they discuss institutions only in the context of
institutional change, in reference to the contributions of Douglass North (1990). 16
They argue that the arrival of capitalism in Latin America is a time of fundamental
changes to the institutional milieu. Yet while they dismiss the old order as irrelevant, they
cannot deny the possibility that it might once again prove influential. Roberts and Araujo
warn:
If Latin American reforms do not maintain their momentum, then the
natural inclination is for the old order to re-infect the system with rent-
seeking forms of behavior, permitting privilege to supplant the market as
the allocator of resources. (Roberts and Araujo 1997:7)
It is reasonable to note that if the old order can return, it must still exist. Rather than
dismissing it, it is better to discuss the ways that institutionalized interactions may remain
influential, perhaps through informal means.
Other scholars use language that is less slanted, yet similarly overlook continuities
through their focus on change. As an example, Sautter explains that,
... economic policies presently pursued in Peru and other Latin American
countries can only be observed with amazement. Old populist recipes are
being rejected. A very orthodox policy of budget discipline is pursued, and
the liberalization of markets is demanded today just as vehemently as it was
rejected before. A dramatic 180 turnaround in the economic order is
taking place. (Sautter 1993:10)
Likewise, Green aims to show the all-encompassing nature of the transformation under
way in Latin America (Green 1995:8). Although it is natural that scholars describe
changes as they occur, this has frequently been done at the expense of more balanced
evaluations of the development picture in Latin America.
16 Roberts and Araujo explain that, As North emphasizes, the path of institutional
change determines the level of economic opportunity in a society. This book is about

69
Other scholars make similar omissions when analyzing the Mexican case in
particular. ^ For example, Loaeza (1996) argues that in the 1980s, Mexican political
institutions were weakened. Likewise, Otero (1996) argues that a Mexican anti-poverty
program created during the neoliberal reform period undermines old corporatist
institutions. Teichman (1996) aims to demonstrate that neoliberal reforms have severely
undermined the corporatist-clientelist relations of Mexicos traditional political structure.
This is another reason Mexico is a good case for further study, since it provides a window
for determining to what extent observers of neoliberal reforms tend to overemphasize
elements of change while neglecting significant institutional continuities.
Much scholarship about the period of neoliberal reforms has tended to emphasize
elements of change rather than continuity (e.g., Edwards 1995; Loaeza 1996; Otero 1996;
Toranzo Roca 1996; Roberts and Araujo 1997; Teichman 1996). Other literature presents
a picture of the other side of the coin, of the continuities that endure the changes, as
discussed in the next section. The authors suggest greater continuity in Latin American
political-economic systems than implied by a great deal of the current literature.
Evidence of Continuity due to Institutions during Reforms
Despite the growth of literature documenting the downsizing of the Latin
American state, and its assumed positive implications for Latin American development, a
these societal transformations (Roberts and Araujo 1997:6).
17 For examples of scholarship emphasizing change in the Mexican case, see Pedro Aspe,
Economic Transformation the Mexican Way (1993), Wayne A. Cornelius, Mexican
Politics in Transition: the Breakdown of a One-Partv Dominant Regime. (1996), Wayne
Cornelius, Ann L. Craig and Jonathan Fox, eds., Transforming State-Society Relations in
Mexico: The National Solidarity Strategy. Stephen Morris, Political Reformism in Mexico:
An Overview of Contemporary Mexican Politics (1995V

70
smaller parallel literature challenges these claims. In an early example of this perspective,
Graham reviews the history of the growth of the Latin American state and the origins of
pressure to reduce the size of the public sector, to limit public expenditures, and to
improve performance (Graham 1990:17). He concludes, however, that, concrete results
to date [1990] in the implementation of these policy priorities have been... meager...
(Graham 1990:17). He argues that by 1990 only Chile, and to a much lesser extent,
Mexico had implemented privatization policies. Instead, he describes the policy dilemmas
in the region:
,..[F]or example in Brazil, Mexico, and Peru...stasis also abounds.... [T]he
size of national indebtedness and the international pressures to continue to
service that debt have placed all governments in the region under
tremendous pressure. In such a setting, while policy alternatives continue
to be discussed, there has yet to be constructive dialogue around the issue
of how to arrive at policies that can respond to the needs of the
international financial community, can be defended internally and publicly,
and can mediate effectively between internal and external pressures.
(Graham 1990: 18)
During this period of uncertainty and international pressures, the development
policies implemented throughout Latin America were characterized by a high degree of
variation both among and within individual states. Yet as the 1990s progressed, the
selection of national development policies became more homogenous throughout Latin
America, and even globally, as neoliberalism gained in popularity. The pressures to
reform the state sector grew stronger.
Since international financial institutions make the availability of loans dependent
upon the acceptance of neoliberal development policies, governments resort to the use of
a variety of methods to demonstrate that their public agendas comply with these
requirements. Maneuvering at the national and subnational levels is used to address

71
international pressures. It has been in Latin American governments best interests to
advance the view that neoliberal reforms have been extensively and successfully applied,
and that any newly formed formal institutions do not demonstrate the characteristics that
led their predecessors to be discarded. External pressures are lessened in part through the
(internationally-broadcast) public acceptance by national policy makers of neoliberal
reforms.
Despite the increase in neoliberal rhetoric during the 1980s, neoliberal reforms
tended to lag behind. During the 1990s, neoliberal reforms did deepen and become more
widespread. Nonetheless, even Edwards (who frequently emphasizes change during this
period) admits that as of 1995, only in
Chile and Argentina, [were] the reforms.. already bearing fruit in the form
of accelerated growth, rapid improvements in productivity, and higher
wages. Other countriesEcuador, Nicaragua, and Peruhowever, only
initiated the implementation stage in the early 1990s, while a small group,
of which Brazil is the most prominent case, had barely taken the first steps
on the reform path by early 1993. (Edwards 1995:9)
In the 1990s the literature documenting the decline of the Latin American state grew, and
the voices of different interpretations of Latin American political economy were heard less
frequently. Yet contradictions still existed between publicly pronounced national
development policy goals and the actual policies subsequently being implemented in many
cases (Manzetti 1994:44).
Institutionalized interactions have significant effects on development during
neoliberal reforms (Grindle 1996). The plans theorized by economists came up
against the realities of the institutional context of different countries (Grindle

72
1996).18 This institutional context includes both historical traditions (informal
institutions) and the role of the state (formal institutions).
Grindle (1996) examines in detail the cases of Mexico and Kenya. She explains
that, ultimately, the problems of effective delivery of social services and physical
infrastructure reflect the training, motivation, and organization of public officials in large
bureaucracies... (Grindle 1996:128). Her work provides support for the notion that the
role of the state in the 1990s depends to a large extent upon its historical
institutionalization and a capable technocratic elite backed by political power of reformist
orientation. Thus the implementation of neoliberal reforms depends heavily on national
institutional heritage.
There are many discrepancies between the predicted and actual outcomes of
neoliberal policies. With the hindsight of the mid-1990s, scholars such as Burki and
Edwards (1996a and 1996b), Cavarozzi (1994), Dornbusch and Edwards (1995), Frediani
(1996) and Manzetti (1994) draw conclusions similar to those of Graham (1990) and
Grindle (1996). For example, Cavarozzi argues that the reduction of the role of the state
in Latin America is somewhat misstated:
l8 Grindle explains that the 1980s and early 1990s were a time which,
...encouraged critical rethinking about appropriate functions of the state.
...Economists debated what the state ought to do in terms of definitions of
public goods, market failures, and the comparative advantages of states and
markets, while others considered what functions were central to the social
contract between state and society. In practice, of course, theoretical
debates about what the state ought to be responsible for were adjusted to
the historical traditions of specific countries, the economic and political
strength and composition of the private sector in each country, and the
political convenience of destatization in individual countries. (Grindle
1996:128)

73
...the replacement of the state-centric model with an alternative matrix
organized around market logic is still far from complete even in those cases
where the process has advanced most decisively, as in Chile, and to a lesser
extent, in Argentina and Mexico. In any event, the change should be seen
as consisting of overlapping elements of decline (linked to the
disorganization of the state-centric matrix), on the one hand, and of
elements of creation related to the reorganization of social behavior on the
basis of a different set of principles, on the other. (Cavarozzi 1994:129)
This more mixed outcome better characterizes the new political economy of Latin
America than a more purely neoliberal label.
Dornbusch and Edwards (1995) similarly determine that neoliberal reforms are not
showing the anticipated results. They reveal, for example, that, Even though structural
reforms appear to be a necessary condition for growth, they are not a sufficient
one(Dornbusch and Edwards, 1995:1). Dornbusch and Edwards reach this conclusion
after examining evidence that in some countries, such as Bolivia, growth has continued to
be shy even years after the completion of the basic adjustment program (Dornbusch and
Edwards 1995:1). To investigate the cause of this slow growth, scholars should examine
more closely the effects of both formal and informal institutions on the implementation of
neoliberal reforms. One important reason why structural reforms do not always lead to
their desired effects is that informal institutions play a role in hindering successful
implementation. The process of reform does achieve its full potential as a result.
Ramn O. Frediani supplies a useful analysis of the comparative success of
neoliberal reforms in Latin America. His study, Planes de Estabilizacin y Reforma
Estructural en Amrica Latina: Una Sntesis (Stabilization Plans and Structural Reform in
Latin America: A Synthesis] 1996), ranks eight Latin American countries on their success
at achieving the stabilization and structural reform objectives pursued through November

74
of 1995 (Frediani 1996:78). ^9 Included in these scores are such institutional factors as
reforms of the state, privatizations, central bank independence and fiscal reforms.
Fredianis results are summarized in Table Two.
Fredianis rankings are somewhat imperfect, but they do represent a valiant effort
at quantifying qualitative data for comparative purposes. The points scale (0 to 4) is fairly
straightforward, although it may at times be difficult to say with certainty whether, for
example, a particular reform is at an intermediate or advanced stage. Other aspects of
his ranking that are more open to challenge are the thirteen chosen categories that he
weights equally. Some critics might consider progress in one category to be of far greater
and / or more enduring significance than change in another category (e.g., should fiscal
deficit or central bank independence really be considered of equal importance to
economic growth?). On the other hand, other scholars might appreciate his attempt to
evaluate the success of reforms without overemphasizing economic growth. His use of
thirteen different categories for each of eight countries provides a fairly appropriate idea
of the big picture comparing the performance of reforms. Even Frediani himself warns
that these rankings are simply meant to provide an approximation of the evaluation of the
problem and to permit learning a global visualization about the degree of success or failure
achieved by the performance of the new paradigm [neoliberalism] in each of the 8
countries analyzed (Frediani 1996:79).
19 The book synthesizes and brings up to date the results of a 1993 CIEDLA series on
Stabilization and Structural Reform in each of the same eight Latin American countries
(see Frediani 1996:5).

75
Fredianis ranking of Bolivias success with reforms adds insight into the above
comments of Dornbusch and Edwards. Frediani also describes Bolivias growth as
very Table Two: One analysis of selected Latin American countries success with
neoliberal reforms (see Frediani 1996:78). 20
Order
Country
Points achieved
Maximum points
Percentage of success
1st
Chile
50
52
96%
2nd
Argentina
38
52
73%
3rd
Peru
32
52
58%
4th
Bolivia
28
52
54%
5th
Mexico
24
52
46%
6th
Brazil
19
52
37%
yth
Uruguay
17
52
33%
8th
Venezuela
15
52
29%
20 The point totals are from 13 different categories, each with a minimum of 0 points and
a maximum of 4 points for each category. The categories are grouped into the
performance of structural reforms (privatizations, state reforms, external openness and
market regulation), stability and monetary-fiscal order (price stability, central bank
independence, international reserves and bank reforms), performance in fiscal politics
(fiscal deficit, fiscal reform, fiscal evasion and fiscal equality) and economic growth. The
points scale is as follows: 0 points = the political reforms have either not begun or are in a
planning stage; 1 point = actions have been initiated; 2 points = intermediate stage; 3
points = advanced stage; 4 points: the culmination of the process (see Frediani 1996:100-
101). Economic growth is a ranking that roughly rates annual growth rates of gross
domestic product, with Mexicos -7% rate receiving a score of 1 for growth, and Chiles
7% rate receiving a score of 4 for growth (using data from 1995) (see Frediani 1996:79
and 101).

76
poor during the 1985 to 1995 period (Frediani 1996:20-21). Even when the economic
growth rate reached 4.2% (in 1995), the countrys population growth of 2.5% had a
neutralizing effect on the overall impact of this growth for Bolivia.21
A glance at the status of Bolivian reforms supports the hypothesis that the first
generation of neoliberal reforms was easier than the ones left to accomplish, and that
institutional reforms take longer than other types of structural reforms (Burki and Perry
1998). Frediani allows for a maximum of 4 points on each of 4 aspects of structural
reforms: privatizations, state reforms, external openness and market regulation, for a
possible total of 16 points. Bolivia receives a score of 7 out of 16 possible points for
successful structural reform according to Frediani (1996:101). Chile, by contrast, receives
a score of 15 out of 16 points (ibid.). Bolivia receives a high score of 3 points (on a scale
of 0 to 4, where 4 represents a completed reform process) on external openness (Frediani
1996: 101). Within the subcategory of state reforms, on the other hand, Bolivia receives
only 1 point, and only 2 points for market deregulation (Frediani 1996:101). This
supports the hypothesis that first generation reforms (in this case, opening the economy to
trade, investment and financial flows) are more likely to have occurred than second
generation institutional reforms (since the other aspects of structural reforms received
scores of only 1 or 2) (Frediani 1996: 101).
Fredianis scores and rankings suggest that many Latin American countries still
have a long way to go before achieving the goals anticipated through neoliberal reforms.
21 Bolivias growth in per capita GDP as a percentage of constant prices grew at a rate of
only 0.7 percent on average from 1987-1992, 1.7 percent in 1991 and 1.3 percent in 1992
(see Sebastian 1995:7).

77
This appears quite significant when one considers that the reforms had been a national
focus for more than a decade at the time the study was conducted. Other scholars have
reached similar conclusions about the success of neoliberal reforms (e.g., Burki and
Edwards 1996a; Burki and Perry 1997 and 1998; Cavarozzi 1994; Graham 1990;
Savastano 1995).
Some neoliberals have begun to speculate on the potential backlash that the lack of
progress of neoliberal reforms could create (eg., Burki and Edwards 1996a; Morrow
1998). Burki and Edwards, for example, note with great concern that,
The Latin American recovery is proceeding at a slower pace than was
anticipated by most analysts, ourselves included.
The slow recovery of the regional economies is troublesome for a
number of economic, social and political reasons. In many countries,
modest economic performance over the last few years is generating
impatience and a sense of disappointment with the reform process. An
increasing number of people are disillusioned and beginning to look at
policy alternatives. Although this disenchantment has not been translated
into an activist anti-reform movement, it is slowly generating reform-
skepticism. What makes this particularly disturbing is that the reform-
skeptics do not have a coherent plan and tend to offer an assortment of
mutually inconsistent policies with an unmistakable populist flavor. (Burki
and Edwards 1996a:2)
The discrepancy between the anticipated dates for successful completion of
neoliberal reforms and the realities of current delays must be understood more clearly.
The consequences of failing to rapidly and completely implement the remaining reforms
and realize the anticipated economic goals could have dire consequences. In order to
understand the source of some of these delays, closer examination of one Latin American
case will provide significant insight. Perhaps the most representative case is the case of
Mexico. Mexico is considered one of the strictest followers of neoliberal reforms, and yet,
the success of the reforms is still lacking (Edwards 1995; Frediani 1996; Savastano 1995).

78
Savastano, for example, calls Mexicos growth performance far from spectacular, and
criticizes the sluggish response of output (Savastano 1995:51). He believes the
transition ought to move more quickly in order to be considered successful. This concurs
with Fredianis evaluation of Mexicos growth. Frediani calculates that Mexican growth is
only in the initiation stages, in fact lagging behind the performance of all seven other
countries he examines. 22 Thus the case of Mexico will provide an excellent window for
the examination of the impact of institutional factors on the implementation of neoliberal
reforms.
Conclusion
In summary, the anticipated reductions in state institutional power by many
analysts in general have apparently been (and continue to be) overly ambitious. The
ensuing documentations of reductions in state institutional power are also often
overstated. At the same time, the views of institutional economists, historical
institutionalists and others have been smothered under the avalanche of a growing (and
rather uncritical) acceptance of neoliberalism in the late 1980s and most of the 1990s.
Theoretical arguments about the role of institutional factors are muted amidst
claims that development depends mainly on economic growth, with politics and public
policies being of secondary importance. National processes, including the role of
institutions in the implementation of neoliberal reforms, have been neglected in many
recent analyses of Latin American development. Some relevant exceptions to this trend
22 Frediani ranks the other countries growth as follows on his scale from 0 to 4 (see
preceding footnote): Chile: 4; Argentina and Peru: 3; Bolivia, Brazil, Uruguay and
Venezuela: 2; and Mexico:! (Frediani 1996:101).

79
are appearing, as some scholars (and even the IMF) begin to discuss the need for a second
generation of reforms. For example, Burki and Edwards maintain that it is imperative that
the neoliberal reform process now be broadened to new spheres, including disassembling
the remains of the old populist structures... (Burki and Edwards 1996a:4).
To delve more deeply into the effects of institutions on Latin American countries,
an examination of the Mexican case will be provided. Chapter 4 consists of a historical
introduction, and Chapters 5 and 6 analyze of the role of institutions during neoliberal
reforms. This close-up of state institutional effects will highlight the myriad of ways in
which institutions hinder, moderate and distort the neoliberal project.

CHAPTER 4
CASE BACKGROUND: THE HISTORY OF THE INSTITUTIONALIZATION OF
THE MEXICAN STATE
A case study of Mexico will provide a window through which to view the impact
of institutions. Although the Mexican case is somewhat singular, it will nonetheless yield
insights that suggest trends in other states. This chapter will discuss relevant historical
features that affect the institutional composition of modern Mexico.
How will the examination of a single case provide us with insights to formulate
broader hypotheses about Latin American development or development of industrializing
countries in general? Many scholars speak of the uniqueness of Mexico within Latin
America. For example, its shared border with the United States has at times helped and at
other times hindered its development. 1 Mexicos large size and oil reserves also
differentiate it from many other Latin American countries. These unique geographical
features are matched by political and social characteristics that are also somewhat distinct
1 The U.S. is today Mexicos largest trading partner, yet relations between the two
neighbors have not always been peaceful. The Mexican American War (1846-1848),
fought over the U.S. annexation of Texas, ended with the Treaty of Guadalupe-Hidalgo,
by which half of Mexicos national territory became what is now the southwestern U.S.
Mexicos nationalization of its oil reserves in 1938 upset the U.S., and remains an issue in
trade discussions between the two. On January 1, 1994, the North American Free Trade
Agreement (NAFTA) went into effect, initiating a free trade area between the U.S.,
Mexico and Canada. (The effects of NAFTA are discussed further in Chapter 6.) For
discussion of U.S.-Mexican relations see eg., Bailey and Aguayo, eds. 1996; Cecea
1970, Handelman 1997:143-173, Rich and de los Reyes, eds., 1997.
80

81
from other areas in Latin America, as discussed in this chapter. These distinctions
strengthen the present analysis rather than interfering with generalization.
A focus on the Mexican case is useful precisely because the formal and informal
institutions of the state have a long history of stability. Unlike other Latin American cases,
Mexico has a political regime that has endured for 70 years without suffering a coup dtat
or even a change in the status of the ruling party. It thus provides an excellent window for
examining the role of institutions during a variety of economic phases, including periods of
rapid economic change or crisis. Other cases in Latin America also provide evidence of
the types of institutional effects revealed in this case, albeit often on a lesser scale. By
studying the influence of institutions in Mexico, we uncover likely effects institutions
elsewhere might be having. The aim is to demonstrate the effects institutions may have, in
order to animate other scholars and policy makers to take their potential impacts seriously
when considering development issues.
To examine state institutional power in Mexico, one must first be familiar with the
character of the Mexican state. The brief background that follows provides a sketch of
important historical factors relevant to this institutional study. Like many institutions in
Latin America, institutions of the Mexican state are the result of centuries of influence,
invasion and repression by the Spanish; association, assimilation and cohabitation between
races; and revolution and cohabitation among peasant, worker and elite classes. The
historical antecedents of modern institutions are sometimes apparent and sometimes more
obscure.
The 20th century began with a revolution against the dictatorship of Porfirio Diaz,
who reigned from 1876 to 1910. The porfiriato (as this period of authoritarian rule is

82
called) was characterized by limited political unrest and a greatly reduced foreign debt, but
also by extremely high infant mortality and low life expectancies (Cumberland 1968:190-
191). Railroads and mining expanded, but illiteracy was at about 90 percent (Handelman
1997:11). Fraudulent land surveying practices created huge haciendas for a small wealthy
minority while impoverished campesinos made no progress in the acquisition of lands, and
even lost control over the lands they did cultivate (Cumberland 1968:201). By 1900, 97%
of the fertile land in Mexico was held by 1% of the population; meanwhile 82% of the
t
rural population was landless (Warnock 1995:22). Foreign investment soared, as
economic policies favored external actors, especially Americans, over Mexican citizens.
By 1910, two-thirds ofMexicos investment came from abroad (Heilman 1978:2). The
Revolution began as a result of discontent by a wide array of actors in this social milieu.
The discussion of the historical influences that follows is limited to post-
Revolutionary phenomena, since the most significant effects visible today are the result of
changes since the Mexican Revolution. 2 Many formal and informal institutions of the
Mexican state were shaped by events that occurred in the aftermath of the Revolution. By
understanding the historical significance of their foundations, it is easier to make sense of
institutional continuities that shape the present and the future in Mexico.
2 Frank Tannenbaum explains that The government, the constitutional system, the army,
the courts, the landholding system, peonage, and many things besides were swept away by
the revolutionary tide (Tannenbaum 1964:vii). Given this vast social and political
change, the institutional heritage surviving this upheaval was limited, and the remnants of
influence retained have since been withered by time, reform and efforts at modernization.
Although this heritage is not entirely irrelevant to the present discussion, further
examination of these phenomena are most appropriately reserved for another study.

83
The Institutional Heritage of the Mexican Revolution
Volumes have been written about the causes and consequences of the Mexican
Revolution.^ Scholarship on the Revolution may be grouped into orthodox and revisionist
literatures. Orthodox works common until the 1970s and 1980s describe the Revolution
as a successful social uprising that benefited the peasantry.^ Revisionist scholars, on the
other hand, describe the Revolution as a power struggle among elites that did little to alter
the fate of the masses. ^ Joseph and Nugent (1994a) suggest a postrevisionist synthesis of
orthodox and revisionist approaches. A postrevisionist approach attempts to mesh top-
down analysis with bottom-up analysis to better portray the complexity of interactions
between elites, popular groups and institutions. This type of analysis provides a more
balanced summary of the Revolution than either orthodox or revisionist scholarship.
The Revolution was fought by citizens with differing motives and varied
aspirations for the future of the state. Citizens grievances included disdain for policies
privileging foreigners, unhappiness with electoral fraud and unlimited presidential
reelections and disputes over economic policies that impoverished huge sectors of
peasants and workers. The variety of revolutionary groups, the history of the Revolution
See, e g., Gilly 1983; Hart 1987; Knight 1986; Womack 1969. For summaries, see
Roderic Ai Camp 1993, Chapter 2: Political-Historical Roots: The Impact of Time and
Place. For a more detailed examination, see Brandenburg 1964, Chapter 3, Fifty Years
of Revolution (1).
4 See, e.g., Brenner 1971 [ 1943], Tannenbaum 1966 [1933],
5 Purnell (1999) makes this point. Examples of revisionist scholarship are works by Ruiz
(1980) and Womack (1991).

84
and the formation of post-revolutionary regimes provide insights into the shape of the
modern governing regime and the forces that sway it.
Francisco I. Madero called the nation to armed rebellion against Diaz, founded the
Anti-Reelectionist Party and advocated electoral reforms and public education (Camp
1993:38). He was responsible for the revolutionary 1910 Plan of San Luis Potos 6 and
ousted Diaz in 1911. Madero ruled until his assassination 1913, when a coup dtat by
Victoriano Huerta removed him with the support ofporfiristas. President Huertas
authoritarian tactics were not readily tolerated, however, and shortly after gaining power,
Revolutionary forces again gained momentum in different areas of the country. These
groups were led by Venustiano Carranza, Alvaro Obregn, Plutarco Elias Calles,
Francisco Pancho Villa, Emiliano Zapata and Pascual Orozco. The four years that
followed were the most violent years of the Revolution.
Class-based needs and geographical variability characterized the demands of
different Revolutionary groups. For example, the Zapatistas in the south placed greatest
emphasis on the demand for land. The followers of Villa in the north sought regular
employment. But neither Zapata nor Villa could unite the country; instead such leadership
was gained in 1914/15 by Carranza and Obregn (Brandenburg 1964: 53). The Carranza-
Obregon combination promised a real social and political transformation (Brandenburg
1964:53).
6 The 1910 Plan of San Luis Potos advocated three important political items: no
reelection; electoral reform (effective suffrage); and revision of the Constitution of 1857
(Camp 1993:38).

85
Popular consensus was limited and political succession during the next decade was
marked by strife, exile and assassinations as a result of class and regional disputes.
Nonetheless, several generalizations may be made about the impact of the Revolution on
national political opinions. One important informal institution that grew out of the
Revolution is a theme of Mexicanism or Mexicanization (see, respectively,
Brandenburg 1964:68 and Camp 1993:39). Roderic Ai Camp explains that
Mexicanization is a broad form of nationalism, encompassing economic nationalism, pride
in Mexican national and cultural heritage, as well as attention to indigenous heritage
(Camp 1993:39-40). Mexicanism was also termed revolutionary nationalism
(Middlebrook 1995:302). Revolutionary ideology was evident in Revolution-oriented
educational institutions, the art of the famous muralists Rivera, Siqueieros and Orozco,
and in music, architecture and literature (Brandenburg 1964:68).
Revolutionary ideals took shape in the early 20th century. Some ideals gained
official status, with their heritage readily observed in formal Mexican institutions
throughout the post-Revolutionary period. Others remained more elusive, and are
described by one scholar as revolutionary myths (Erfani 1995). For example, Erfani
argues that the idea of a strong state was merely a myth created by a misinterpretation of
state sovereignty as state power, when in fact the executive branch of government in
Mexico was culturally and legally obligated, but not actually equipped, to control the
economy in order to protect popular groups socioeconomic interests (Erfani 1995:58).
Belief in the power of the state was thus an informally institutionalized ideal. The list of
formally and informally institutionalized ideals includes such general concepts as social
justice, the acceptance of a strong state, the breakup of large landholdings, acceptance of

86
labor organization and support for social security as well as the Constitution (Camp
1993:40-42). Throughout the 20lh century various Revolutionary ideals remained informal
institutions without formal manifestations, while other ideals became formally
institutionalized without having the effects anticipated and fought for during the
Revolution. As will be demonstrated in the two chapters that follow, the
institutionalization of these Revolutionary ideals is a heritage that remains influential even
at the turn of the 21st century.
Many Revolutionary ideals were formally institutionalized in the Mexican
Constitution of 1917. For example, the ideal of social justice took the form of
constitutional articles dedicated to support public education, the breakup of large
landholdings and labor rights. Article 3 required free, secular and obligatory public
education to be available to all Mexicans, and Article 27 aimed to address the problems of
landless peasants (Erfani 1995:27). Encompassed under Article 27 was legal support for
the ejido, a form of communally held land. Ejidal lands had begun to be distributed as
early as 1915 to groups of land claimants (Randall 1996:328). Constitutional agrarian-
reform measures provided for a host of land issues, including:
...restitution of lands to peasants illegally dispossessed, for rotation of lands
to those without them but who required land in order to subsist, for
recognition of existing small private farms and encouragement of the
creation of more, for the creation of new agricultural centers in order to
bring about widespread distribution of the rural population, for the
limitation of the size of rural property holdings to avoid land concentration,
and, in general, for the forced breakup of the hacienda system. The
Constitution thus made unequivocably clear that the semicollective ejido
and small private farm were to exist side by side. ... [T]he dreaded hacienda
system was doomed for what it had done to the Mexican soul and soilfor
its power concentration and marginal productivity. (Brandenburg 1964:55-
56)

87
The connection between Revolutionary goals and Article 27 of the Constitution is
frequently articulated. Article 27 was the institutional response to the demands ofTierra
y Libertad (Land and Liberty) shouted on the battlefields by peasant insurgents during the
Mexican Revolution (DeWalt and Rees 1994:1). The ejido thus embodied the ideals of
the Revolution in a way that touched the lives of many of the poorest citizens of Mexico.
The impact of the institution of the ejido on agrarian life and rural development
throughout the post-Revolutionary period will be examined in detail in Chapter 6.
The third aspect of social justice described above, labor rights, was also formally
institutionalized in Section 6 of Article 123 (Brachet-Marquez 1994:56). However,
Article 123 merely gave legal status to the conquests achieved through the struggles that
had taken place over the years among workers, the state, and capitalists (Brachet-Marquez
1994: 57). In fact, the Constitution laid foundations that eventually restricted the ability of
labor to achieve further advances (Brachet-Marquez 1994:57).
In sum, the Revolutionary ideals ofMexicanism and social justice had both
informal and formal institutional manifestations, as introduced briefly above. The impact
of these formal and informal Revolutionary institutions on the implementation of neoliberal
reforms in Mexico is discussed in chapters 5 and 6. Also important to the analysis in the
next two chapters is an understanding of the relationship between the Partido
Revolucionario Institucional (Party of the Institutionalized Revolution or PRI) and the
state, an understanding of the linkages between historical Mexican corporatism,7
7 Corporatism is a form of sociopolitical organization. Nikki Craske explains that, The
principle characteristic of corporatism is the vertical, hierarchical and functionally
differentiated organisations which separates potential allies (Craske 1996:80).

88
clientelism and corruption, and information about the sexenio (the six-year term for
presidential office). This essential background is summarized below.
The Relationship Between the PRI and the State
Throughout much of the 20th century, the Mexican political system has been
characterized by PRI-state fusion and statism.8 The dominance of the official party in
Mexican politics dates back to 1929, although it has been renamed twice since its
inception. President Plutarco Elias Calles created the Partido Nacional Revolucionario
(the National Revolutionary Party or PNR) in 1929. In March 1938, populist President
Lzaro Crdenas renamed it the Partido de la Revolucin Mexicana (Mexican
Revolutionary Party or PRM). President Crdenas did more than any other post-
Revolutionary president to fulfill many Revolutionary demands, especially through
agrarian reform.
With the changes instituted by Crdenas, corporatist organization was solidified
under the ruling party:
The old geographical and individual membership structure of the PNR gave
way to an organization of four sectorslabor, agrarian, military, and
popular. The first sector was turned over to trade unionists, the second to
the ejidatarios, the third to the soldiers, and the fourth to civil servants and
miscellaneous elements. These four sectors collectively decided which
among them should be allotted specific public offices to fill, then turned
over the actual nominating process to the designated sector. Once this
sector announced its nomination, all four sectors were pledged to support
the candidate at the polls (Brandenburg 1964:91).
Other than the military sector, which was dissolved in 1940, the corporatist organization
that was formalized under Crdenas has a long heritage. In 1946 Miguel Alemn
8 In statism, the state plays a dominant role in the political economy of a country.

89
redesigned the party, and its name was changed to the Partido Revolucionario
Institucional (PRI). The partys theme was changed from the PRMs For a Democracy
of Workers to the PRIs Democracy and Social Justice (Brandenburg 1964:101). The
institutionalization of the PRI and its relationships with the three key sectors (labor,
campesinos and the popular sector of civil servants and others) has had an extremely
influential effect on Mexican political life for more than five decades, as will be discussed
further in the section on corporatism.
PRI-state fusion makes pinpointing the locus of power difficult. For example,
scholars such as Camp (1993) suggest that the state, rather than the party, is the more
powerful of the two.9 Yet other analysts argue that the party holds the power. Topik
(1993) for example, remarks that the PRIs power has long been considered exceptional
when compared with other parties internationally. He comments that in 1992/93:
.. the PRI still seems to be the most secure political party in Latin
America. Indeed .. the PRI is the longest standing hegemonic party in the
world. This comes as a puzzle after reading these articles which all dwell
on the partys lack ofmodernity, lack ofinstitutionalization, declining
legitimacy, and authoritarianism. Clearly, Mexicos political leaders have
been doing something right. It would be worthwhile studying them. We
need to know...why these political regimes persisted so long in the face of
so many apparent obstacles. (Topik 1993:287)
9 Camp argues:
,..[T]he Party leadership is selected by the president, thus placing the Party
under the thumb of the executive branch. The Party relies on the executive
branch for financial support; generally, the Secretariat of Government
allocates the funds. The support is difficult to measure because it involves
more than money. The government, through its contacts, provides many
other resources, such as lodging, transportation, and meals for those doing
Party business. (Camp 1993:142)

90
Since the PRIs hegemony has declined in recent years, few scholars would still describe
its role as powerfully as suggested by Topik. Nonetheless, this description provides
insight into the historical significance of the PRI over many decades. The fall of the PR1
has been forecasted by various observers over the course of many decades, yet through
the use of corporatist and clientelist 10 ties (as well as varying degrees of electoral fraud),
it has managed to hold on to power.
The traditional success of the PRI is due in large part to its network of corporatist
and clientelist resources (Klesner 1996). The formal and informal institutionalization of
these relations created vertical linkages between many different layers and classes of
society. Rural-urban links were formed as well as personal ties that were handed down
over several generations. PRI / state linkages unified control over the national
development project, and restrained the private sector by monopolizing subsidies,
issuing public contracts and licenses and controlling labor unions (Fernndez Jilberto and
Hogenboom 1996:148; Grindle 1996:49).
During the period of Import Substitution Industrialization (ISI) the state protected
Mexican businesses from foreign competition. ISI began in Mexico in the 1930s and did
not end until the mid- to late-1980s (Lustig 1998). The PRI / states control over labor
facilitated capital accumulation and increased business investment (Handelman 1997:118).
Although links between different business groups and the state vary in strength, historical
ties to business have been fortified since the administration of former President Salinas de
Patron-clientelism, often called simply clientelism is a system of clientelist
interactions between elites (patrons) who disperse benefits to certain individuals (clients)
in exchange for political support.

91
Gortari. The symbiotic relationship between the PRI and top business elites was brought
to light when news leaked of a private dinner Salinas held on February 23, 1993 to request
contributions of 25 million dollars from each of a handful of top businessmen (Handelman
1997:103-104).
The special relationship between the PRI and the state, as well as the corruption
and corporatism that accompanies it, helps to maintain political stability in Mexico (Knight
1996). The PRI has used its position to manipulate its future electoral success while
gradually slipping further and further from the meeting the goals once held by its original
supporting sectors:
.. the socioeconomic promises of the Constitution were, partially and
belatedly, fulfilled, while its liberal democratic provisions languished, and
would continue to languish, down to the present. For, even as they rolled
back his more radical policies, favouring capital over labour and
marginalisingrecently abolishingthe ejido, Crdenass successors
doggedly maintained the dominant party, the partido del estado. [Knight
references Garrido (1982) pp.461-2.] The latter, now sporting an
oxymoronic revolutionary-institutional label (PRI), has for over sixty
years monopolised national power, controlled a huge network of
patronage, and kept up an incestuous relationship with the state which
underpins Mexicos remarkable political stability. (Knight 1996: 225, italics
added)
The imminent downfall of the Mexican political system is questionable. As Knight argued
in the mid-1990s, the PRI will one day be defeated, but
.. .that day has been repeatedly heralded in the past and in each case it has
proved a false dawn. The cement of corruption, suitably repointed every
now and then, has held the whole edifice together remarkably effectively.
(Knight 1996:231)
The corrupt PRI/ state has historically engendered political stability (Knight 1996; Morris
1991; Topik 1993). At the turn of the millenium, the power of the PRI is at a new low,
and even the regime itself now claims only 42 percent of the national vote (Dillon 1999b).

92
Yet as the New York Times reports, the potential for the PRI to win the 2000 presidential
election depends once again largely upon internal political strategies of the PRI, rather
than challenges from outside the party:
Polls suggest that the party can win the presidential election next year, too,
but only if the party can avoid a damaging split. As a result, the way the
party selects its candidate is crucial, because powerful politicians seeking
the nomination could bolt the party if they feel mistreated, several analysts
said. (Dillon 1999b)
In recent years the PRI has made efforts to democratize candidate selection and reduce
electoral fraud, as discussed below in the section on the sexenio. These reforms may also
be viewed as part of any partys ongoing strategy to appeal to the electorate. Meanwhile,
allegations of electoral fraud continue, especially at the local level. The PRI /state has a
long history of finding ways to maintain its political capacity, and current events seem to
bolster this image.
Analysts are divided over whether to consider Mexico a strong or a weak state
(e.g., Collier 1992, Erfani 1995). A strong state has the capacity to virtually ignore
societal interests when choosing and implementing policies, whereas a weak state must
pay greater heed to societal demands (Collier 1992:126). In considering the relative
strength of the state, the interplay between political and economic liberalization is
highlighted.
In this study, the PRI/state is generally considered more of a strong state than a
weak state; nonetheless, it has relative strengths and vulnerabilities in its relations to
different social sectors (Collier 1992:126). Traditionally, the Mexican state has enjoyed a
strong position vis--vis labor, but more recently, it faces a weaker position vis--vis the
private sector. As the private sector gains prominence and economic significance through

93
neoliberal reforms, the states weak position relative to the private sector results in a
weaker overall position of the state. This weakening may then alter the balance of power
between the state and labor or the agrarian sector as well. In turn, this effect may cause
labor and agrarian sectors to reassert their demands, forcing political changes that grant
benefits to these traditional sectors. This circle of effects thus contributes to the
maintenance of the status quo.
The party and the state have distinct strengths and benefit from the ability to alter
and trade their roles over time (Fernndez Jilberto and Hogenboom 1996). At times the
PRI supports specific interests, while transferring responsibilities to the state:
The highly centralizing capacity of the state that is expressed by the
concentration of public power, has given sufficient capacity to both the
state bureaucracy and the PRI, together with the business elite, to define
the national economic policy. This has happened without counterweight
and in the absence of a pluralist political arena. . The role of the PRI has
none the less varied historically. Sometimes, the PRI forms the synthesis of
contradictory interests negotiated within the party that, at such moments,
takes the shape of a restricted political arena. At other times, the PRI
transfers the crucial role of the formulation of the national project to the
state and the political class of the state. (Fernndez Jilberto and
Hogenboom 1996:149)
An understanding of this relationship between the PRI and the state in Mexico is important
to the present study of the influence of institutions on neoliberal development policies.
Related to this PRI/state relationship is corporatist sociopolitical organization.
Mexican Corporatism, Clientelism and Corruption
The Mexican corporatist system has historically been marred by corruption and the
use of clientelistic ties. These features of Mexican corporatism make it impossible to
analyze the sociopolitical organization without reference to the effects they have on the

94
system. The following discussion will reveal how the three are embroiled, resulting in a
sociopolitical organization that is both formally and informally institutionalized. It will
highlight the differences between a generally sociological determinist approach used by
Howard Wiarda (1973, 1981) an agent-centered approach such as that used by Philippe
Schmitter (1974), and a historical institutionalist approach taken by Alfred Stepan (1978).
The perspective adopted here is similar to that of Stepan, yet Wiarda provides background
crucial to this (and any) discussion of Latin American corporatism. If one chooses an
institutional level of analysis, the contributions of both Stepan and Wiarda are especially
useful.
Wiarda defines corporate entities as groups of people bound together by similar
functions, interests, occupations, locations, etc. (Wiarda 1981:34-35). Modern Mexican
corporatism is a type of sociopolitical organization in which corporate entities are linked
vertically in the shape of a pyramid or inverted cone, with the central state apparatus at the
top (Wiarda 1981:34-35, 231). Corporatism throughout most of the 20th century in
Mexico has involved the incorporation of significant societal groups into the political
system headed by the PRI / state. But corporatist roots lie even deeper; there are two
different traditions of corporatism: the ...formal-institutional corporative systems of the
1920s and 1930s and the sociocultural tradition of corporatism which has a far longer
history... (Wiarda 1981:118). Both of these traditions are relevant to the present study of
Latin American development, but the formal-institutional corporative systems of the
1920s and 1930s denominates for Mexico specifically the corporatist system headed by
the ruling party / state.

95
An understanding of corporatism is essential to an observation of Latin America
during periods of modernization (Wiarda 1981). Corporatist institutions have been and
remain influential to Latin American development:
A study of corporatism is crucial if we are to understand the responses to
modernization of the Iberic-Latin nations. Corporatism and the corporatist
tradition are not just ideas and institutional forms of passing interest,
reaching their heyday in the interwar period and then disappearing, but
instead constitute an on-going tradition strongly intertwined with the
history and culture of the area, and continuing today to influence political
behavior and the structure of society and polity in a great variety of
systems, both traditional and modernizing, both left and right. (Wiarda
1981:133)
Much evidence from the 1990s suggests that Wiardas claims remain relevant at the turn
of the 21st century. During the 1970s, as today, it was popular to dismiss corporatism. 11
With the hindsight of the 1980s and 1990s, the claim that corporatism was already almost
irrelevant in the 1970s seems now to have been overstated. As with the longevity of the
PRI, corporatist institutions continue to demonstrate remarkable endurance despite claims
that they are losing relevance.
Other scholars dismiss the relevance of corporatist forms of organization by
arguing that it is merely a type of organization chosen by political elites. For example,
11 Wiarda noted the dismissal of corporatism during the 1970s:
Corporatism, until...[the late 1970s], had been widely dismissed as both
anachronistic and irrelevant. Defeated in World War II and apparently
discredited...., corporatism as an ideology and form of sociopolitical
organization seemed, for a time, to have been erased and forgotten. .a
philosophy and form of national organization whose historical epoch had
been superseded...
Such judgments as regards corporatisms alleged passing and irrelevance
are premature and ill-founded. Corporatist ideology and sociopolitical
structure. .manifest continued strength throughout the Iberic-Latin

96
Philippe Schmitter (1974) argues against the explanatory power of a (corporatist) political
culture approach and in favor of an agent-centered approach. Yet as Stepan points out,
Schmitters arguments are weakened by his dismissal of the role of political culture and
historical continuity (Stepan 1978:54). Stepan argues that,
Schmitter explicitly rejects the utility of a political culture approach to the
emergence and consolidation of corporatist regimes... [H]is rejection of any
historically based explanation leads him to what are somewhat strained
positions... [Wjhile he correctly places an emphasis on the role of
corporatist practices in structuring patterns of interest representation, he
also documents that by and large a wide variety of elites accept this
pattern as concurrent with the political culture into which they were
initially socialized and which they operationally acquire. (Stepan 1978:53-
54, fn. 19, emphasis added)
From a historical-institutionalist perspective, the acceptance by elites of preexisting
patterns of interest representation is evidence of the explanatory power of institutions.
Schmitters position cannot explain the persistence of a variety of similar corporatist forms
over a period of centuries. Stepans discussion, on the other hand, highlights the benefits
of integrating the insights of structural and agent-centered approaches. His position
represents a middle ground between Schmitter and Wiarda. Wiardas view of corporatism
is an extreme which has been labeled corporatism as cultural continuity (Stepan
1978:54). Stepan reveals that, .. corporatism as structure is always only a partial
sectoral phenomenon of the overall political system, and ... supplementary analytical
frameworks must be used to study other aspects of the system (Stepan 1978:71).
Although there are some benefits in the view of corporatism as elite response to crisis,
culture. .not just in the traditional regimes but in various modernizing ones
as well. (Wiarda 1981:117)

97
the structural features of corporatist forms should not be entirely dismissed (Stepan
1978:55).
When existing corporatist arrangements fail to fully incorporate all major sectors,
neo-corporatist forms emerge (Stepan 1978). For this reason, explanations based solely
on cultural continuity lose instructive power:
Explanations based on continuity are relatively weak where the
phenomenon to be explained is not so much continuity but the emergence
of stronger and novel forms of corporatism after a period of relative
abeyance. The simple fact is that neo-corporatist institutions are more
prominent in the Latin America of the 1970s than they were in the 1950s...
(Stepan 1978:54)
From a historical institutionalist perspective, both Wiarda and Stepan make
important points. A heritage of corporatism is part of the context in which state elites find
themselves. At times these elites have more potential for autonomous power such as, for
example, the late 1910s through 1930s in Mexico. The significance of elite roles varies
historically, and although the behavior of individuals is sometimes most significant, the
changes they elicit occur within a broader context of institutional continuities.
This is a good way of looking at the relationship between elites and cultural/
institutional context. The reason elites were able to solidify corporatist relations in the
post-Revolutionary decades is because of the prior history of corporatist relations. One
can combine the theoretical insights of both Wiarda and Stepan to achieve a historical
institutionalist perspective that leaves space for the role of individuals, yet can explain
continuities even if formal institutional ties are weak. Thus evidence of the rise of
neocorporatist links does not detract from a discussion of the continuities of corporatist
institutions. Instead, it reveals how the informally institutionalized heritage of relying on

98
corporatist forms of governance creates a space for the newest variant of corporatism,
namely, neocorporatism.
Since neoliberal reforms of the 1980s and 1990s intend to dismantle the remaining
non-democratic (when compared to a liberal ideal), economically inefficient
corporatist forms of social interaction, these decades (and the ones to follow) are well-
suited to an examination of whether such changes actually occur. Corporatism runs
counter to neoliberalism because it is nationalist. ^ Nationalist corporatist sociopolitical
organization is supported by the informal institutional support for Mexicanism (dating
from the Revolution) described earlier in this chapter. Corporatism is also linked to ISI
policies. Since both corporatism and ISI policies shared a common nationalism, the
former became subject to the same judgments of the latter. As discussed in Chapter 3, ISI
represented an economic development strategy that was widely considered a failure by the
early 1980s, and corporatism was the sociopolitical organization that was supposed to
have helped ensure its viability.
Between 1970 and 1981, government expenditure had climbed from 20 percent of
Mexican Gross Domestic Product (GDP) to 35 percent (Wyman 1983:4). The budget
deficit grew from an average of 2.5 percent of GDP in 1965-72, to an average of 8
Wiarda describes the links between corporatist ideology and nationalism:
Corporatist ideology was nationalist in two ways. It implied a rejection of
the foreign influences...implanted in Latin America contrary to its own
cultural traditions, a repudiation of moral, political, and economic
dependency. It meant also a search for what was viable in Iberias and
Latin Americas own traditions on which a new nationalist sociopolitical
structure could be based. .. [Latin Americans were] seeking to discover in
their own histories an indigenous framework for national development.

99
percent in 1973-1976, and reached 14.1 percent in 1981 (Lustig 1998:18,22). Foreign
debt ballooned, the importation of consumer goods rose and inflation accelerated from
28.7 percent in 1981 to 98.8 percent in 1982 (Lustig 1998:40). In the 1981/ 82 debt
crisis, capital flight was continuous, and Mexico at first attempted to sustain the value of
the peso through short-term external borrowing (Lustig 1998:24). In August 1982,
Mexico suspended payments on its debt, an event that marked the end of an era of easy
borrowing for developing countries (Lustig 1998:25). ^ The lost decade of
development of the 1980s had begun for Latin America.
As economic strategies were reconsidered during the 1980s, corporatist strategies
gained new critics both nationally and internationally. Nationalist economic and political
development strategies are considered inappropriate in the neoliberal late 20th century.
Neoliberal reforms aim to dismantle both the nationalist economic policies (i.e., ISI) and
the nationalist political policies (i.e., a corporatist rather than liberal basis for a countrys
sociopolitical organization) of earlier decades.
What comprises this inappropriate sociopolitical organization in Mexico? At
the top of the pyramid is the PRI / state. Mexican corporatism is not an ideal type of
corporatism, because not all organised groups in society are affiliated to the PRI
(Craske 1996:80). Instead, three main groups have historically been incorporated (labor,
peasant and popular). As introduced above, their incorporation into the government was
Repudiating the extremes of liberal individualism, the corporatists
sought to reconstruct state and society on an organic basis. (Wiarda
1981:129)
1 3 For an excellent study of the Mexican economy from the precursors to the debt crisis
through the late 1990s, see Lustig (1998).

100
not fully institutionalized until the late 1930s. At this time, labor, peasant and popular
groups gained stronger organizational means of ordering their interactions with the
government. The corporatist political system set in place in the first decades after the
Revolution did have a distinctly inclusionary character when compared to many other
Latin American cases (Knight 1996; Stepan 1978). This encouraged certain forms of
corruption that fostered governmental stability and legitimacy, as is discussed below
(Knight 1996:224).
The traditionally incorporated groups remain important in Mexican politics. ^
They are represented by the long-standing Confederacin de Trabajadores Mexicanos
(the CTM or Confederation of Mexican Workers), the Confederacin Nacional
Campesina (the CNC or National Peasant Confederation) and the (often renamed)
Federacin Nacional de Organizaciones y Ciudadanos (the FNOC or National
Federation of Organizations and Citizens), whose membership is drawn from the so-called
popular sectors (Craske 1996:80, 86). The popular sector is composed of middle
classes, small business owners, government employees and professionals (McCormick
1995:263). The traditional incorporation of these three groups has been broadened to
include similar groups that represent similar interests (Otero 1996a: 13). ^ These
14 Ruth Collier argues that government policy since 1985 has sought to change the
partys coalition and social base, and to disarticulate the coalition with labor (Collier
1992:158). Middlebrook (1995), on the other hand, reveals that the governing elite had
strong reasons to preserve its alliance with labor despite the weakening of labor during the
1980s. The positions of these and other scholars on the incorporation of labor are
discussed in Chapter 5. The relative significance of the peasant sector will be debated in
Chapter 6.
1 ^ Otero explains that,

101
incorporated groups enjoy access to privileges that nonincorporated groups cannot attain.
In exchange, they are expected to demonstrate loyalty to the PRI, especially during
elections. This system has worked to the advantage of the PRI and elites by encouraging
group leaders to respond more to the needs of the regime than to the needs of their groups
(Grindle 1996:49). Business elites lobby the regime as well, and are able to influence
policy (ibid ). Under the corporatist system, access to benefits is dependent upon political
considerations, and economic growth facilitates the system (Grindle 1996:49).
For these reasons, corporatism has been criticized as anti-democratic and biased in
favor of upper class groups. On the other hand, some analysts suggest that the corporatist
system has actually served to ease class tensions. 16 Regardless, the possible benefits of
such stability should be weighed against the means used to achieve it.
The corruption of corporatist and clientelist systems is complex and interwoven.
Political corruption in 20th century Mexico takes several different forms. The first, known
as peculation or government at the service of graft, is risky in the long-term; the other,
graft at the service of government, seems to work better in the long-term, and involves
both the carrot and the stick as methods (Knight 1996:226-227). There are functional
differences between the two variants:
There are other organizations in the labor movement that belong to the
PRI, even though not to the CTM, such as CROC (Revolutionary
Confederation of Workers and Peasants) and CROM (Regional
Confederation of Mexican Workers). Similarly, other peasant
organizations loyal to the PRI include CAM (Mexican Agrarianist Council)
and CCI (Independent Peasant Council). (Otero 1996a: 13)
16 Teichman argues that, Although operating at all levels of the social and political
systems, corporatism and patron clientelism have been particularly important in mitigating
dissent from the popular classes (Teichman 1996:150).

102
Peculation involves government officials creaming off spoils. This may be
systemic to the extent that the spoils system is used to reward members of
the political elite..., thus ensuring loyalty and averting rebellion. Such a
system could be denoted modern patrimonialism. As a short term
solution.. the system may prove functional.... In extreme forms, such
peculation can reach sultanistic proportions, thus incurring popular
resentment and political illegitimacy. At best, therefore, government at
the service of graft is a risky, short-term political expedient.
In contrast, . .graft at the service of government is more systemic and
system-maintaining. It involves the use of corruption to perpetuate the
entire political order...its practices collective rather than individual...
However, it assumes two contrasting forms, which may be termed
coercive and allocative, or, more colloquially, the stick and the
carrot... (Knight 1996:227)
Thus the difference between the two types of corruption lies in whether (1)
rewards are only available to a very limited elite and are key to maintaining their loyalty,
or whether (2) for example, bribery is expected by all who interact within the system and
loyalty is assumed because using the system is the only existing way to achieve ones
needs. The latter type, which is more common in Mexico than in other corrupt Latin
American states, is more stable, perhaps even more democratic (Knight 1996:227).
Graft at the service of government is an institutionalized norm in Mexico, evident in
both formal and informal interactions (Knight 1996). This type of corruption persists
despite democratic reform efforts (Morris 1991).
The so-called carrot and stick supports the Mexican corporatist system. It is
often difficult to distinguish where acceptable, legal interactions leave off and corrupt,
illegal interactions take over. Thus government patronage is at times legal, at times only
formally legal, and at other times flatly illegal. The expectation of continued patronage is
an institutionalized norm in Mexico throughout the 20th century. This norm interferes with
the implementation of neoliberal reforms in Mexico, as will be examined in Chapters 5 and

103
6. One list of specific examples of government patronage includes programs initiated in
the 1920s as well as others functioning during the neoliberal 1990s:
agrarismo and labour reform in the 1920s and 1930s; a spate of Federal
programmes during the long economic boom of the 1950s and 1960s; oil
funded public works in the late 1970s; the ambitious Solidarity
Programme (PRONASOL) of the 1990s. (Knight 1996:229-230)
The use of PRONASOL as an example of a corporatist and perhaps corrupt institution is
especially significant. PRONASOL was a highly publicized national anti-poverty program
that was touted as an innovative, transparent means to overcome the clientelistic features
of disbursement of traditional social programs. Its inclusion into this list highlights the
ways historical clientelist and corporatist interactions affect contemporary political
interactions in the reformed, non- or neo-corporatist 1990s. The political
manipulation of PRONASOL is discussed in Chapter 6.
Corruption and corporatism remain embedded in the nature of even the present
Mexican political system. In this system of corrupt rewards, patron-client ties continue to
bolster the position of the PRI, adding to its remarkable longevity (Knight 1996:230).
The Mexican political system is a complex web of formal and informal interactions
institutionalized over many decades and renewed with each sexenio. 1 7 Institutionalized
patronage is significant even at the turn of the 21st century in Mexico. Clientelist
relationships are institutionalized, and the PRI/state has institutionalized both carrot and
stick forms of corruption. Mexican sociopolitical organization is an intricate mix of
corporatist arrangements supported by corrupt interactions carried out along patron-
17 Knight describes it as .. .a sophisticated system of patronage and repression, pan o
palo, coercive and allocative corruption, now run by a third generation of political leaders,
steeped in its compelling, idiosyncratic and largely unwritten rules (Knight 1996:231).

104
clientelist ties. Another institution that characterizes the Mexican political system is the
sexenio.
The Sexenio
The Mexican political system is heavily influenced by the cycle of presidential
elections. Since 1917 there has been no presidential reelection. Instead, the office may
only be held for a single, six-year term, the sexenio. Article 83 of the Constitution
mandates that the Presidential term of office begins on December 1st and stipulates that
under no circumstances can a person be President during two separate sexenios (Article
83, Mexican Constitution^).
There are both benefits and disadvantages inherent in a six-year term. For
example, the term is long enough to accomplish slightly more long term goals, yet if the
elected candidate governs poorly, he / she has time to do more damage than if the term
were shorter. The ruling PRI has learned to use the sexenio to its advantage by pursuing
different strategies at different stages of the presidential cycle.
To perpetuate the reelection of PRI candidates, the PRI has characteristically
concealed national economic problems that surface near the end of a sexenio. This serves
to bolster the impression of adequate leadership by the ruling party. At around the same
time, usually the fourth year of a sexenio, the membership of the presidents cabinet (from
which the incumbent will be selected) is finalized (McCormick 1995:252). The president
and cabinet members each have vertical networks of camarillas or cliques of politicians
18 Constitucin Poltica de los Estados Unidos Mexicanos, Trigsima Quinta Edicin,
1967, Editorial Porrua, S. A., Mxico, D. F. Originally published by the Pan American
Union, General Secretariat, Organization of American States, Washington, D C., 1968.

105
ranging in size from 30 to 150 members (McCormick 1995:251). Camarillas are bound
together by personal loyalty to their leader rather than by ideology (Cornelius 1996:41).
This is another example of patron-client ties in action. This personalistic system serves to
perpetuate the rule of the PR1 by creating opportunities for career politicians to advance
based on their contacts with other PRI politicians. The camarilla is used strategically
throughout the sexenio. At the end of each sexenio, members of the presidents camarilla
are expected to support the image of the PRI and obscure inadequacies of government.
By the time the new candidate is elected, reforms are overdue; in fact, they are
usually long overdue. At this point, the incumbent distances himself from the mistakes of
his predecessor. He reorganizes the government, gives members of his camarilla powerful
positions in the new government and changes official policies. During the early years of
each sexenio, an anticorruption campaign takes place that serves many functions:
... [I]t helps the incoming administration disassociate itself from the
previous administration; it diverts attention from certain new issues and
problems; it attempts to boost the legitimacy of the new government
among the popular sectors; it allows a means of purging political enemies;
and it foments a centralized, presidential control over a virtually new crop
of bureaucratic officials. (Morris 1991:85)
To distinguish the ebb and flow of the anticorruption campaign during the sexenio,
Morris uses data on the number of corruption-related news stories between 1970 and
1984 (Morris 1991:83-101). He reveals three key aspects of the anticorruption campaign:
First, the anticorruption campaign includes three essential components:
rhetoric and mobilization, the prosecution of public officials, and structural
and legal reforms. Second, anticorruption campaigns carry certain inherent
dangers, such as how to deal with former presidents, that often detract
from their credibility. Third, despite the serious tone they project and the
optimism they inspire, anticorruption campaigns have proved largely
unsuccessful in more than temporarily curbing the incidence of corruption.
(Morris 1991:91)

106
Rather than assuming that a period of reforms represents a sea change in political
accountability, reforms might better be judged as part of a longer historical process.
When this cycle of corruption and reforms is forgotten, scholars tend to overemphasize
the depth and efficacy of new policies, losing sight of the developmental impact of
historically institutionalized processes of governance and control.
An incumbent can point to problems that are belatedly becoming obvious and use
them to garner support for his proposed reforms, even if they include austerity programs
or policies with a high initial / short term social cost. He can attempt to pass the blame for
the emerging problems to external or extenuating circumstances, rather than poor
governance, thereby retaining as much respectability as possible for his party. By the
second half of the sexenio, some of the new policies take a toll on certain social groups.
Some groups benefit at the expense of others. In order to perpetuate the PRI regime, the
president must attempt to regain the loyalty of some of them. Through the use of
corporatist and clientelist means, the ruling party targets select disenchanted groups,
making them the beneficiaries of government programs and heavily publicizing the ensuing
improvements in their situations. This apparent progress coincides with the fifth and sixth
years of the sexenio, and serves to win the votes of significant factions in the next round of
elections.
These and other factors combine to increase the level of corruption at the end of
each sexenio. This has led to the institutionalization of what is know as the year of
Hidalgo, the scramble for money and personal gain at the end of the term of political
office:

107
High turnover rates, the lack of job security, and the absence of a solid
pension or retirement fund often lead public officials to prepare individual
retirement schemes; even for those who continue in government, the
unlikelihood of remaining at their current post erodes their accountability
to the constituents of the agency. Increased public spending and a
weakening of the anticorruption campaign during the latter years of the
term further contribute to the opportunities for corruption. The result is
widespread corruption during the final year of the sexenio ... [T]he year is
popularly dubbed the year of Hidalgo (referring to Miguel Hidalgos
likeness on Mexican currency): este es el ao de Hidalgo, chin-chin el que
deje algo (this is the year of Hidalgo, he is a fool [polite form] who
leaves something). (Morris 1991:84-85)
Morris argues that the year of Hidalgo and the anticorruption campaign represent two
sides of the same coin (Morris 1991:86); as the sexenio wears on, the campaign against
corruption wanes and corruption itself grows. Thus the PRI uses different phases of the
sexenio to achieve various electoral and governing objectives. These two phases, the
anticorruption campaign and the year of Hidalgo, are informally institutionalized patterns
of behavior in the ongoing chronology of Mexican political interactions.
Neoliberal Policies and Trade Agreements
To understand the impact of these and other institutions on the implementation of
neoliberal reforms in Mexico, a brief general introduction to the reforms in Mexico is
useful. *9 The first economic stabilization package, the Program of Immediate Economic
Reorganization {Programa Inmediato de Reordenacin Econmico, or PIRE) was
announced in December 1982, under the government of President Miguel de la Madrid
Hurtado. It consisted of a shock treatment in 1983 succeeded by gradualist policies
I9 For a thorough description of Mexicos economic reforms, see Lustig (1998). See also
Cook, Middlebrook and Horcasitas, eds. (1994), Gonzlez Gmez (1998), Heath (1998)
or Ramirez (1997).

108
during 1984-85 (Lustig 1998:29). Shock treatment began with a large devaluation of
exchange rates, and a planned cut in public spending; gradualist policies meant that no
new drastic fiscal and exchange rate measures would be implemented (Lustig 1998:30-
31,34).
Yet this stabilization program failed, and during the 1983-1985 period, actual
inflation was 25-45 percent higher than the original International Monetary Fund (IMF)
predictions (Lustig 1998:35). Between 1983 and 1987, foreign debt had to be
rescheduled three times (Heath 1998:42). These initial orthodox stabilization methods
failed in part because Mexico was experiencing inertial inflation, a cycle of inflation
followed by high salary increases that cause further inflation (Heath 1998:44). Structural
reforms were limited. Privatization of public firms began, but meaningful changes
proceeded very slowly.
Trade reform began in 1985 and Mexico joined the General Agreement on Tariffs
and Trade (GATT) in 1986. Trade liberalization was accelerated in the mid-1980s, and
tariffs were reduced from an average of 27 percent in 1982 to an average of 13.1 percent
in 1987 (Heath 1998:45). In October 1987, stock markets crashed internationally, and in
response, Mexico initiated a new stabilization program that would combine elements of
heterodox and orthodox approaches, along with an Economic Solidarity Pact (discussed in
Chapter 5) (Heath 1998:44).
In December 1988, President Salinas de Gortari took office and pushed even more
strongly for economic liberalization. Economic reforms took precedence over political
reforms during this sexenio (Valds Ugalde 1994:231). Mexicos foreign debt was
rescheduled for a fourth time since the crisis began, and this time outstanding external debt

109
was reduced and interest payments were lowered (Heath 1998:47). Salinas also initiated
PRONASOL to ameliorate extreme poverty (as discussed in Chapter 6). Nonetheless,
Mexicos GDP per capita grew at declining rates during the Salinas sexenio, and domestic
savings fell.
Mexico began negotiations for a free trade area with the U.S. in 1990, and
NAFTA went into effect on January 1, 1994.20 NAFTA became the worlds largest free
trade area. Mexico also signed a free trade agreement with Chile in 1991, and pursued
free trade agreements with Central America, Colombia and Venezuela (Lustig 1998:134-
135). Stronger ties with Europe and Japan were also high priorities. In 1994, Mexico
became a member of the Organization for Economic Cooperation and Development
(OECD)
These trade agreements liberalized trade among the participating countries, but at
the same time they contradicted the neoliberal ideal of liberalizing trade universally.
Through the creation of these specialized trade agreements, member countries gained a
special interest in development issues affecting their trading partners. These linked
interests have had a significant effect on the U.S. response to economic crises in Mexico
since the NAFTA.
Following these moves to liberalize trade, in 1994-95 Mexico experienced another
severe economic crisis, often referred to as the peso crisis. The peso was severely
devalued, falling from 3.46 to the dollar in December 1994 to 6.33 per dollar by mid-
1995, and to 7.54 by early 1996 (Handelman 1997:139). Analysts argued that the peso
20 As mentioned earlier, the effects of NAFTA are discussed further in Chapter 6.

110
should have been devalued earlier, and others critiqued the way the devaluation itself was
carried out. The Salinas administration apparently decided to postpone the devaluation
because of a desire for smooth national elections in 1994, and a fear of disrupting the
banking system (Lustig 1998:163). The international impact this crisis had on economic
flows is sometimes called the tequila effect.
The crisis was essentially the result of three factors: an expansive monetary policy,
the current account deficit and unilateral trade liberalization (Gonzlez Gmez
1998:46).21 The Mexican government had issued nearly $30 billion worth of short-term,
dollar denominated treasury notes (Tesobonos) that were to come due in 1995
(Handelman 1997:138). This represented 62 percent of total federal government debt in
1994 (Gonzlez Gmez 1998:49). In addition, a balance-of-payments problem was
renewed as a result of trade liberalization. The low domestic savings rate had made
Mexico extremely dependent on foreign funds. These problems were also compounded by
domestic political issuessuch as the Zapatista uprisingthat made foreign investors
nervous (Handelman 1997:138-139).
The Mexican economy recovered rather quickly from the peso crisis, due largely to
rapid moves by the U.S. to protect the economy (Lustig 1998:172-200). Just over 50
billion dollars became available as an international rescue package, about half of which
was actually used (Gonzlez Gmez 1998:50). A structural adjustment package was also
More precisely, Gonzlez Gmez explains that these three factors are:
the way monetary policy (liquidity, interest rate, and exchange rate policy)
was implemented during 1994; the size of the current account deficit
(which reflected a huge gap between imports and exports), as well as the
means used to finance it; and the way in which trade liberalization took

Ill
signed with the IMF, and in 1996, the economy rebounded with 5.1 percent growth
(Heath 1998:57). The U.S. role in bolstering the Mexican economy during this difficult
period was key to its rapid recovery, a recovery which has obscured from international
attention many urgent development needs which still linger.
Despite a broad variety of neoliberal reforms, the Mexican economy still has major
weaknesses. Among these is a need for tax reforms, an increase in consumer savings,
deregulation and better debt management (Heath 1998:58-59). As a result of strong
corporatist ties, neither the electricity monopoly nor the oil monopoly has been
dismantled. Income inequality rose sharply during the implementation of neoliberal
reforms (Lustig 1998:94). On the whole, the reforms have yet to produce tangible results
for most of Mexican society. 22 The chapters that follow will examine the ways that state
institutions impact the implementation of these neoliberal reforms.
Conclusion
A number of formal and informal institutions have historical significance in
Mexican development. These include both an informal belief in Revolutionary ideals and
the formal institutionalization of many Revolutionary ideals into the Mexican Constitution.
PRI /state fusion causes many citizens to disbelieve that a change in the governing party is
place (essentially a unilateral and indiscriminate import tariff reduction),
especially during the early 1990s. (Gonzlez Gmez 1998:46)
22 Heath (1998:59) explains that,
Still, the thorniest issue concerning all of the reform efforts since the late
1980s is the lack of tangible results. Regardless of whether the goals for
reform have been met or revised, if genuine improvements do not
materialize soon for most of society, the political backlash will set the
country back... .The cost of the reforms have been much higher than
anticipated; those tangible benefits are necessary to make it all worthwhile.

112
even possible. At election time, this informal norm causes some citizens to simply void
their votes in protest.
Corporatist institutions are powerful in the Mexican political system. The
corporatist system is marked both by formal corporatist institutions such as the historically
incorporated CNC, the CTM and the FNOC, and by informal institutions, such as the
belief that in order to accomplish political goals, corporatist organization is best (or
inevitable). The heritage of corporatist forms of governance has led to a debate over the
existence of neocorporatism, which has a broader social base. This will be discussed
further in Chapter 5.
Related to the corporatist sociopolitical organization is the reliance on patron-
client ties between elites and citizens seeking to benefit directly from the system. This may
take forms that range from fairly appropriate relations to downright corrupt interactions.
These institutionalized interactions include both carrot and stick types of corruption.
Corruption is the focus of an anticorruption campaign at the beginning of each presidential
sexenio, but as the sexenio passes, public officials return to profiteering tactics,
culminating in the corruption-filled year of Hidalgo.
When thinking about the history and future of the Mexican corporatist system, it is
useful to adopt a historical institutionalist perspective such as that suggested by Stepan
(1978). This integrates the insights of structural and agent-centered approaches. Elites
shape development but they also take the institutional context as a given, and make
decisions accordingly. The following chapters will highlight the ways that state
institutions hinder and distort the effects of neoliberal reforms. Still, policy objectives
over time are dynamic, not frozen. As neoliberal policies are implemented, policy contexts

113
change. Changes in a policy context may necessitate a corresponding change in the
policies to be implemented, and policy makers can evaluate and reevaluate the
effectiveness of their policies. When the intended results are not realized, policy makers
have the opportunity to reformulate their recommendations, although this process is often
delayed or ultimately never accomplished, as the next two chapters will reveal.
For this reason, the institutional features of the state are important to keep in mind
when studying development in Mexico or any developing country. This background on
Mexican sociopolitical organization provides the context for the discussion of the role of
institutions that follows. In Chapters 5 and 6, the formal and informal institutions that
have historically played a role in Mexican development are examined to determine their
impact on the implementation of neoliberal reforms at the end of the 20th century.
The sample of institutions examined in the following chapters is not representative
of all state institutions. State institutions linked to the private sector are not examined.--
Private sector links to the state have varied historically since the Revolution, alternating
between support and opposition for the PRI/state. State-private sector institutions
support and advance neoliberal policies in many ways. On the other hand, elements of the
private sector had also gained benefits such as manufacturing subsidies during the period
of import substitution industrialization. As these are eliminated, some neoliberal reforms
hurt parts of the private sector. While the overall impact of state-private sector
institutions may encourage and advance neoliberal reforms, in other ways, these
23 The impact of state-private sector institutions on neoliberal reforms is the subject of
other scholarship (e g., Roett 1998; Valds Ugalde 1994).

114
institutions may serve as forces that retain traditional positions of privilege for parts of the
private sector.
This project focuses instead on state institutions in labor and agrarian sectors. The
decision to focus on these was made specifically because of their traditional historical
positions in the PRI/state. Neoliberal reforms aimed to weaken the power of these
traditional sectors. Since their positions have been far more stable (although they have
gradually been losing strength) than those of state-private sector institutions, labor and
agrarian institutions provide better insights into the ways that state institutions impact the
implementation of neoliberal reforms.

CHAPTER 5
THE MAINTENANCE OF INSTITUTIONAL INFLUENCE IN MEXICO:
CORPORATIST INSTITUTIONS, PACTS, AND STATE-LABOR INSTITUTIONS
Historical Mexican state institutions influence the implementation of neoliberal
reforms during the 1980s and 1990s, as this chapter and the next will demonstrate. In
general, these institutions hinder the implementation of reforms, although at times their
impact is somewhat mixed. This chapter begins with a general review of the status of the
reforms in Mexico, which sets the stage for the presentation of a broad spectrum of
institutional effects, highlighting the impacts of both formal and informal institutions. The
maintenance of corporatist institutions and the role of pacts are debated, as well as a
number of institutions influential in the labor sector. State labor institutions are shown to
have significant effects during the implementation of neoliberal reforms. The evidence
presented here is qualitative in nature and broad in scope. The objective is to provide the
reader with a sense of the variety and significance of institutional effects.
The study of institutional effects during neoliberal reforms is inextricably linked to
an examination of the political dimension. As economic reforms spread across the globe,
so too has the push for political liberalization. Disagreement exists over the extent to
which economic liberalization is possible concurrent with political liberalization (see, e.g.,
Przeworski 1990). The tensions between political and economic liberalization are
manifested in state institutions in Mexico.
115

116
General Institutional Effects at the National Level
A number of scholars provide general assessments of the extent of neoliberal
reforms and point to institutional effects impacting their implementation (e g., Ramamurti
1999, Roett 1995, Teichman 1996). The success of reforms has been mediated by formal
and informal state institutions, and discrepancies exist between the pronounced national
development policy goals and the policies actually implemented (Teichman 1996). After
the debt crisis of the early 1980s, Mexicos neoliberal reforms were characteristically slow
rather than rapid (Teichman 1996). 1 Trade liberalization did not begin to take place until
1985, external economic events in 1987 and 1988 caused a deepening of the process of
economic restructuring and badly needed fiscal reforms began in 1989 (Teichman
1996:155; Tornell 1995:70). The timing of these policy reforms lagged years behind the
original rhetoric of reform (which followed on the heels of the debt crisis of the early
1980s). Even by 1996 only 21.13 percent of all state-owned enterprises (SOEs) in
Mexico had been privatized (Ramamurti 1999:141).2
A variety of institutionalized commitments carried out through various state
institutions initially served to dampen the reforms of many national policies (evenly and
1 According to Teichman, this was especially true during the first several years of the
reforms:
Despite what appeared to be a firm commitment to structural change,
however, the government proceeded slowly with its program. During 1983
and 1984, import controls and subsidies remained in effect. And although
the state divested itself of over 200 public enterprises... these enterprises
were either paper companies or were in areas considered neither strategic
nor priority. (Teichman 1996:153)
2 Ramamurti provides data on 24 developing countries and describes their privatization
programs in general as languishing (Ramamurti 1999:142).

117
across-the-board). Neoliberal reforms were not always promoted or upheld, and a
significant discrepancy exists between the rhetoric of reform and their actual progress.
Institutional factors influenced both the direction and the pace of these reforms, leading to
unexpected outcomes.
Mexico has had a public agenda as well as a different, hidden agenda for its
national politics over many decades (Knight 1996a; Romanucci-Ross 1986). A gap exists
between constitutional principle and daily practice, with the 1917 Constitution serving as
the public transcript and the actual daily practice of politics expressing the hidden agenda
(Knight 1996a). An example of this is the concealing from the public of the true state of
the economy, especially at the end of a sexenio, keeping public tensions artificially low
even during difficult economic times. This has occurred historically, with extreme
instances found at the end of the Salinas de Gortari presidency in 1993-1994. Since at
least the 1920s, reformers of the state have sought to compel politicians to live up to their
public transcript (Knight 1996:224).
The double agenda has been played out most transparently at the national level
during most of the 20th century. A similar double agenda now also exists between the
national and international levels, with a public agenda being presented to international
observers and financiers, while a hidden agenda reflects more nationalistic political goals.
Since this type of politics (characterized by both a public and a hidden agenda) has been
common at the national level for more than half a century, it enjoys a level of tolerance
within Mexico. The double agenda hinders the impact of neoliberal reforms, but is used to
bolster the ruling regime.

118
The PRI regime is famed for its longevity and stability. This political stability is a
result of the fact that the ruling party is based on an ongoing compromise between two
factions: the modernizing tcnicos and the traditionalist politicos. This split was
established in 1963 (Collier 1992:97). The traditionalists are career politicians, and are
referred to as dinosaurs by the modernizers. The modernizers, on the other hand, are
professionally educated holders of top cabinet and policy-making posts who rose through
bureaucratic and administrative ranks rather than political, party, or electoral careers
(Collier 1992:86). Yet the tcnicos economic policy-making does have political links,
since they are politically sensitive to the demands of the private sector. They have
attempted to move the state away from its alliance with peasant and labor sectors in favor
of the urban middle classes. Thus tcnicos can benefit politically from opening the
economic system. This rough distinction between politicos and tcnicos is only one aspect
of the divisions within the PRI. In terms of political liberalization, politicos and tcnicos
are also divided into those who want to maintain one-party hegemony and those who
favor political opening (Collier 1992:125).
The lack of consensus within the PRI causes political conflicts to become
manifested in PRI institutions. As tcnicos push neoliberal policies, their policies are
supported by the private sector. Private sector support benefits the tcnicos politically,
and their strength gains relative to the politicos. Politically, however, if the PRI loses too
much support from traditional sectors, it faces the possibility of losing political power to
the extent that it might no longer be able to implement neoliberal policies. Thus, changes
in economic policies have reflected political compromises between politicos and tcnicos.

119
The political tensions between tcnicos and politicos are played out at various
levels of the Mexican political system. At the highest level, different candidates for the
presidency of the Republic represent these competing perspectives, as may be discovered
by examining the recent selection of the PRIs presidential candidate for 2000. President
Zedillo (1994-2000) promised political liberalization would occur during his term as
president, and one of his strongest actions in this direction was his decision to give up the
tradition of the dedazo. The dedazo refers to the presidents handpicking of his successor
within the ruling party. President Zedillo chose instead to institute a presidential primary
for the selection of the PRIs candidate for the presidency, and the first PRI primary was
held on November 7th, 1999.
The political positions of the PRI candidates reveals the ongoing tensions evident
in the PRI. The candidate who won the primary (with 5,337,545 of 10 million votes),
former interior secretary Francisco Ochoa Labastida, is widely known to have been
President Zedillos personal favorite. Labastida is more of a tcnico than a politico, since
he has been appointed to most of his political positions (although he has been vague about
his position on economic policies). Many Mexicans believe that if the dedazo had not
been eliminated, Labastida would have been the handpicked successor. The candidate
who most represented the traditionalist politicos, Roberto Madrazo Pintado, gained only
2,766,866 votes. After the primary, Madrazo quickly threw his support behind the
candidacy of Labastida, who previously had promised to provide Madrazos supporters
with important political posts if he won the primary. This action reveals the continuities of
the political compromise between tcnicos and politicos within the ruling PRI. If

120
Labastida wins the Presidential elections on July 2, 2000 (as predicted), then this political
compromise will continue to define PRI politics during the 2000-2006 sexenio.
The tensions between tcnicos and politicos at the highest level of Mexican politics
(the presidency) are also manifested at other levels. In the example just described,
Madrazo supporters are offered political positions in order to fortify the unity of the PRI
in preparation for national presidential elections. These mid-level political posts will thus
be filled with a significant number of traditionalist politicos interested in maintaining
corporatist and clientelist ties with specific constituencies. In turn, at the lowest level of
the political system, political patrons will maintain the ties with these politicos, in order to
retain access to political spoils to disperse to their clients in exchange for political support.
In this fashion, the tension between politicos and tcnicos reverberates through the entire
PRI government. This is but a single example of the linkages and tensions between the
two groups that become manifested in state institutions at various levels.
When neoliberalism was adopted by Mexican tcnicos as a means of resolving the
development problems of the debt crisis, more traditionalist politicos sought to retain key
elements of corporatist socio-political arrangements that were politically convenient. A
variety of informally institutionalized norms also influenced the pace of espousal of
neoliberal reforms. The reforms filtered through these institutionalized norms about the
responsibilities between state and society.
Mexican neoliberalism is not even touted domestically as neoliberalism, but rather,
is better known as social liberalism. Former President Salinas de Gortari named the
Mexican variant social liberalism for political reasons (Middlebrook 1995:302). The
name social liberalism conjures up the ideals of the Revolution, and appeals to the

121
electorate on that basis. By articulating social liberalism, Salinas was able to defend the
necessity of neoliberal reforms while associating himself with many of the ideals of the
Revolution in the process:
... [Salinas] highlighted the liberal, constitutional elements of
postrevolutionary beliefs, reaffirming the states responsibility for
promoting social justice while criticizing the state-led, protectionist model
of economic development traditionally associated with revolutionary
nationalism. By referring to his program as the reform of the revolution,
Salinas sought to ground his ideas firmly in that earlier tradition. One
might even argue that Salinass strong emphasis on social justice themes
reaffirmed the continuing vitality of the most important political ideas
embodied in the Mexican revolution, ideas whose survival into the 1990s
depended in large part on the continued presence of mass organizations
such as the CTM which were committed to defending them (Middlebrook
1995:303-304).3
The name social liberalism epitomizes the continued informal commitment (or
pact) between the regime and its constituents. The social aspect of Mexican
neoliberalism may in fact be quite weak, but at least on some level, the policy sounds more
attentive to social needs. This remains important in a country such as Mexico, whose
political stability is based on continued social tolerance of development policies that carry
significant burdens for large segments of the population. These aspects are important to
consider when a development policy is conceived. Revolutionary norms have acted as a
filter to the implementation of neoliberalism:
The cultural poverty of neoliberalism has led to the appearance of...
hybrids... [of] free markets with traditional social values...
In Mexico, this hybrid has been dubbed social liberalism. Social
liberalism seeks to reclaim the tradition of nineteenth-century Mexican
liberalism and the political values associated with the Mexican Revolution.
3 The CTM is the Confederacin de Trabajadores Mexicanos (Confederation of Mexican
Workers).

122
In this sense, the state is to be less proprietary while remaining strong. The
state deregulates and privatizes, but not totally...
Mexican social liberalism is not, nor can it be, pure neoliberalism.
(de la Garza 1994:200-201)
Former President Salinas presented the ideology of social liberalism to the PRI and
all Mexicans as an alternative to both state capitalism and libertarianism (Middlebrook
1995:303). During the first two years of the Salinas administration (1988-1989), this
brought forth,
...an unusual combination of political reformism, economic neoliberalism,
and social welfarism.... The first contemplated the destruction of the basis
for competitive politics and the transformation of the official party into a
more responsive organ of the state; the second chose the regional free-
trade route to economic recovery; the third rekindled the popular alliance
via a revamped welfare program. (Brachet-Marquez 1994:161)
Thus the political and economic policies implemented under Salinas involved a mix
of policies. Some were overtly organized around previously institutionalized relationships,
and important elements of social welfarism remained.^ Although the tcnicos goals were
the implementation of neoliberal reforms, the political compromise with the politicos and
the institutional framework shaped how the reforms would be enacted.
Thus two types of overarching institutions were perpetuated nationally during the
implementation of neoliberalism /social liberalism, with distinct impacts on development.
First, the informally institutionalized double agenda survived despite the reformist aim
of transparency in political and economic interactions. Domestically, the public agenda,
and the agenda of the politicos espoused continuing Revolutionary ideals (including
^ This is further evidenced through the governments highly publicized anti-poverty
program, PRONASOL, which is examined in Chapter 6.

123
commitments to labor and peasant sectors), while the more hidden agenda involved the
implementation of neoliberal structural adjustment policies that would take a harsh toll on
large segments of the population. In relations with the international financial community,
on the other hand, a different dynamic was at work. Mexican politicians (especially the
tcnicos) sought to demonstrate a deep adherence to neoliberal dictates, while in reality,
the regime still had many state-owned enterprises and relied heavily on the support of
corporatist mass organizations. The institutional limits on the implementation of
neoliberal reforms made it impossible for the regime to publicly present an accurate
portrayal of the misshapen process, either domestically or to the international financial
community. Ultimately, this caused economic and political problems both domestically
and internationally. Domestically, constituents have grown increasingly dissatisfied with
the toll the reforms continue to take, as income inequality grows and poverty remains
high. ^ The Zapatista uprising is a manifestation of this discontent. Internationally, the
peso crisis in December 1994 set off a precipitous drop in investor confidence.
The second type of institution perpetuated nationally with the articulation of social
liberalism is the reliance on mass organizations such as the CTM. Salinas attempted to
shift the benefits of social welfarism from the incorporated collective social groups to a
more liberalized commitment to popular rights (Middlebrook 1995:304). Yet although the
incorporated collective groups have been downgraded in significance, they have hardly
disappeared from the scene. Instead, informal pacts with these incorporated groups
5 The number of poor grew from 36 to 43 percent of the population since Zedillo took
office, a 20 percent increase during his sexenio (National Union of Workers... September
16, 1999).

124
remain significant during the implementation of neoliberal reforms, and these pacts are
refreshed by the rhetoric of social liberalism in Mexico.
One way to examine whether neoliberal reforms are successfully transforming the
populist state is to examine the transformation of institutionalized corporatist and
clientelist policies. Given the significant historical impact of corporatist and clientelist
institutions on the political economy of Mexico, one would expect a package of neoliberal
reforms to attempt to curtail their impact, since such institutions are considered strong
hindrances to the efficient and democratic operation of political and economic systems.
Neoliberal reforms aim not only to alter formal institutions of the state, but also to
eradicate the corporatist and clientelist informal operating procedures in Mexico and other
Latin American states. As de la Garza argues, Neoliberalism and corporatism appear in
theory to be mutually exclusive (de la Garza 1994:199). How extensive has the
reduction of corporatist and clientelist institutions been?
Declining Corporatism and Clientelisin?
This section will demonstrate a variety of ways that corporatist and clientelist
institutions hinder and distort the impacts of neoliberal reforms. Corporatism and
clientelism are not fading away as a result of neoliberal reforms, although some scholars
have predicted their demise (e g., Teichman 1996; Tornell 1995). Neoliberal policies may
not force the dissolution of patronage systems. Indeed, some neoliberal policies might
actually strengthen older (and often corrupt) informal institutions of the state (Tornell
1995:70). Since neoliberal policies have been and are being adapted at different times, not

125
all reforms occur simultaneously. During the interim, old corporatist ties continue to
function, although they may adapt new forms.
Another neoliberal claim often made about corporatism in Mexico is that it is being
replaced by neocorporatism, a variant with less state control. This claim has been
exaggerated. State corporatism (corporatism in an authoritarian context) may be
distinguished from societal corporatism (corporatism in a liberal democratic context)
(Schmitter 1979:13). Similarly, the term neocorporatism is sometimes adopted to
avoid the negative connotation that can derive from the identification of corporatism with
fascism (Collier 1995:157, fn. 1). Thus the term neocorporatism is generally meant to
imply a more societally-oriented corporatism. This is true especially when applied to a
European context. However, when used to describe Mexico and other areas of Latin
America, its meaning is slightly different (Collier 1995:157 fn. 1).
In the context of the analysis of Mexico, neocorporatism continues to leave room
for significant state control. The term is used more to highlight a shift (and broadening) in
which groups are incorporated than to denote a more fundamental change in state-society
power relations. In Mexico in the 1990s, a highly controlled version of neo-corporatism is
emerging (Jones 1996:190).
The PRI now reaches out to groups that are no longer captured within the older
incorporated structures. This PRI technique of coopting disenchanted groups has
historical precedents, and reveals the linkages between the older variant of corporatism
and neocorporatism:
The project of political regeneration... has come from within, not to rid the
system of corporatism or its institutions, but to seek to renew these
institutions and to devise new methods to allow them access to the system.

126
Again, there is an historical precedent; setting up parallel systems of
intervention is a common theme in Mexican political history which has not
hitherto been labelled as neo-corporatist. (Jones 1996:197-198)
Neocorporatism is granted space only to incorporate new sectors, not to undo state-
corporatism. The term neocorporatism can be used to mean different things in different
contexts, and in the Mexican context it should not be construed to represent a significant
shift in control from state to society. On the contrary, it describes a co-opting of more
societal groups without meeting new societal demands. Mexican neocorporatism may
counter-intuitively imply a strengthening of the state vis--vis civil society (Harvey
1993b:214).
Disassembling corporatist institutions is a more complex task than is frequently
acknowledged. The attempt to reform the Mexican political system by doing away with
corporatist ties sometimes backfires (Craske 1996). For example, from 1989 to 1993
there was an attempt to reform the popular sector of the PRI, including regularizing
membership and making political practices more transparent. 6 After a series of reform
strategies,^ the reforms eventually failed. The reforms failed because of the PRIs
contribution to the maintenance of power by elites, who worked to keep the old
institutions in place in order to continue systematically reaping personal rewards.8 Certain
6 The popular sector is the third pillar of the PRI, originally called the Confederacin
Nacional de Organizaciones Popidares (National Confederation of Popular
Organizations, or CNOP). The CNOP changed names to Une-Ciudadanos en Movimenio
(Unite-Citizens on the Move) in 1989 and to Federacin Nacional de Organizaciones y
Ciudadanos (National Federation of Organizations and Citizens, or FNOC) in 1993
(Craske 1996:84-86).
7 See Craske 1996:84-86.
8 The attempt to reform the popular sector reaffirmed both the power of the PRI and the
importance of corporatist institutions, as revealed by Craske:

127
early advances were actually reversed, causing a return to traditional corporatist relations.
This has broader implications for the more general attempts to reform corporatist
institutions under neoliberalism.
This example supports the validity of a historical institutionalist perspective on the
role of institutions in development. Reform attempts were less significant than the existing
institutions, which dictated the ultimate outcome of this reform attempt. Neoliberal
reformers operate within institutional settings that may stymie their best efforts. Historical
institutionalism focuses attention on these institutions.
The continuities of corporatist ties are also highlighted through evidence of
corporatist pacts, the structuring of PRONASOL and other features of the Mexican
political system in the 1980s and 1990s (as discussed in the remainder of this chapter and
in Chapter 6). If corporatist and clientelist relations and state intervention are purportedly
becoming obsolete, one should not expect to find prominent examples of such links in
action. Yet the persistence of strong clientelist ties is evident even in Mexicos third
neoliberal presidency. After the economic crisis of 1995, a 71 billion dollar bailout of
Mexican banks took place. In March 1998, Mexican President Zedillo proposed the
transfer of debt that the bailout agency incurred to the state, an accounting shift that
To control the reform project, both regarding the party and.. broader
political and economic questions, the elite need to stay in power and the
PRI, whilst not as effective as it has been, still provides a substantial
contribution to the maintenance of power. Consequently, a complete
dismantling of the system was not carried out giving the old guard
important political leverage allowing them to counter attack. This ... has
lead to U-turn and retrenchment of corporatism. The final stage of the
Popular Sector reform returned it to the same basic structure as
1988,..[T]he membership was left virtually intact...and, more importantly,
the political practices remained largely the same. (Craske 1996: 85-86)

128
would raise domestic public debt from 28 percent to 42 percent of GDP (Anderson,
Washington Post. August 7, 1998).
The bailout is strong evidence of the continuation of long-standing agreements
between big business and the government.9 Clientelistic ties between banking elite and
the PRI/state are latent in the expensive bailout:
Citing banking secrecy laws, finance officials have refused to release the
names of companies and individuals who defaulted on debts that the
government subsequently took over under a program that kept Mexicos
banking system from collapsing. The secrecy has fueled suspicion that the
bank bailout amounts to a scam by power brokers in the ruling Institutional
Revolutionary Party (PRI) to line their own pockets and protect their
friends. The scandal has already grazed [Mexican President] Zedillo, the
head of the central bankthe Bank of Mexicoand several presidential
hopefuls. (Anderson, Washington Post. August 7, 1998)
Accusations of clientelist political corruption abound (e.g., Tricks, Financial Times
of London. August 10, 1998). The public visibility of the continued clientelistic ties
between powerful business interests and the PRI / state also serves to perpetuate a belief
in clientelism as a way to achieve ones personal goals. The governments bailout of the
bank was in line with the clientelistic relations institutionalized in its past. The bailout
program took over 7.7 billion dollars worth of questionable or illegal loans, including 4.4
billion in loans that the banks had given to other entities with which they had direct
business relationships (Dillon, New York Times. July 22, 1999a). The scope and scale of
this incident leave little room for doubt about the continued significance of these
9 One analyst criticizes the depths of these connections by asserting that During almost
seven decades in power, the ruling Institutional Revolutionary Party (PRI) has cultivated
ties with the business elite and stonewalled opposition-led corruption probes (Tricks,
Financial Times of London. August 7, 1998).

129
institutions to national development. The 14 percent increase of Mexican domestic public
debt relative to Mexican GDP will impact development for years to come.
These accusations reveal the folly of analysts who claim that clientelism has faded
into insignificance in recent years. Clientelism is not becoming obsolete in Mexico in the
late 20th century, undone by the transparency of modern politics and the adoption of more
free-market economic agendas. Even decades after the onset of neoliberal reforms,
clientelist ties continue to influence the direction of national development. Corporatist
institutions also adopt new guises in a shifting environment, rather than simply passing
away. This point has been disregarded by neoliberal reformers, at the expense of more
suitable development policies that could be designed with consideration of these
institutions in mind.
Corporatist Institutions Embodied in Pacts at the National Level
during Neoliberal Reforms
A pact is a specific type of institution that may influence the outcome of neoliberal
reforms. Pacts may assume either formal or informal incarnations. To describe the
informal (i.e., unwritten) pact, the concept of a pact of domination in state-labor
relations is presented ^ To reveal the role of formal pacts, the significance of the 1987-
1997 tripartite agreements signed by representatives of business, labor, farmers and the
10 This terminology was originally coined by Fernando Cardoso (1977), and has been
used recently by Viviane Brachet-Marquez, in The Dynamics of Domination: State. Class,
and Social Reform in Mexico. 1910-1990 (1994).

130
state is discussed. Informal and formal pacts are institutions that significantly distort the
implementation of neoliberal reforms.
The Pact of DominationAn Informal Pact
The concept of a pact of domination is useful to understanding Mexican state-
society relations. Although institutionalized, it is an unwritten (and thus informal) pact. A
pact of domination is the institutionally sanctioned and coercively backed set of rules
that specifies who gets what at any one time within the confines of a national territory
(italics original, Brachet-Marquez 1994:33). In this institutionalized relationship, top-
down control by the state is checked by societal power:
The pact-of-domination construct encapsulates two apparently
contradictory elements: the notion of pact implies negotiation, conflict
resolution, and institutionalization, while that of domination connotes
inequality, antagonism, and coercion. The juxtaposition of these two terms
is meant to express the idea that though people accept subordination and
exploitation, they do not do so unconditionally. The notion ofpacted
domination indicates simultaneously the power wielded by the state over
dominated classes and the institutional or extrainstitutional means the latter
have at their disposal to modify the terms of their subordination. (Brachet-
Marquez 1994:32-33)
The concept of a pact of domination provides a means of understanding not only
institutional continuities (which are expected), but also institutional change (which is more
elusive). In times of class conflict and political crisis (during which there is a partial
rupture of both formal and informal institutional mechanisms), the reformist state responds
with concessions to incorporated societal groups (Brachet-Marquez 1994:7). These
episodes of class conflict punctuated by social reforms have created an institutionalized
pact between the state and society (Brachet-Marquez 1994:7). This institutionalized pact
may be traced from 1910 through 1990, through several different development periods.

131
The pact of domination continues to be relevant at the end of the 20th century,
despite neoliberal reforms. The informal pact between the state and the incorporated mass
organizations is embodied in the rhetoric of social liberalism. The Mexican state responds
overtly to the needs of constituents with attempts to improve the general perception of the
states responsiveness to societal needs and to sustain the pact of domination. For
example, the PRI/state may be challenged by independent workers unions, and choose to
include some of them in aspects of governance. Yet at the same time, they may exclude
more radical groups. 1 This process over time fortifies the belief that working with the
state is one way to achieve group goals. It also bolsters the position of the state as a
significant force in state-societal relations.
Adaptability characterizes many institutionalized relations in Mexico, and is one
reason for the incredible longevity of the PRI regime (see e.g., Collier 1992, Zapata 1996).
Informal pacts among social actors and the state cause the state to hang on to elements of
social welfarism, in contradiction of the goals of neoliberal reforms (Brachet-Marquez
1994; de la Garza 1994). The informal pact of domination is also manifested in formal
state institutions.
The Pact for Economic Solidarity and other Formal Pacts
Formal pacts are the embodiments of these informal institutions, revealing the
reincarnation of historical pacts in tangible modern institutions. Recent intersectoral pacts
tie together some of the same sectors that have frequently been features of the Mexican
H See, e.g., Government Denies Independent... (July 1999:11).

132
political landscape since the Revolution. Examples of such intersectoral pacts include in
the annual formal economic pacts created between 1987 and 1997. The first of these, the
Pacto de Solidaridad Econmico (Pact for Economic Solidarity or PSE) was signed on
December 15, 1987 by former President Salinas and representatives of the labor, farming,
and business sectors (Aspe 1993:22). 12 These sectors overlap with sectors incorporated
into the PRI and benefiting from the corporatist system, as described in Chapter 4.12
The PSE was established to fulfill both economic and political roles:
... [T]he... PSE... was established as an agreement between the economic
elite, the official labour unions and the government to reduce inflation by
means of wage reductions and price control. The political purpose of the
PSE was the re-establishment of class harmony and a moderated
reformulation of the tripartite social pact with a corporatist nature.
(Fernndez Jilberto and Hogenboom 1996:150)
The PSE is evidence that the historical social pact between the Mexican state and key
social groups remains important during the period of neoliberal reforms. 14 The
12 Grindle recounts the agreements of each sector:
The government agreed to discipline public finances, cutting spending to
20.5 percent of GDP and increasing revenues. Workers agreed to
moderate their future wage demands in return for a short-term adjustment
of 38 percent and an incomes policy based on a basket of basic
commodities. In return for wage restraint, business promised to increase
productivity and lower profit margins. The bargain for farmers included
relative price adjustments in return for increases in productivity. The
government committed itself to tight monetary policy, an exchange rate
policy to minimize the need for major devaluations, expansion of trade
liberalization, and privatization of the large public enterprise sector.
(Grindle 1996:56)
12 Labor and peasant sectors have historically been incorporated. Big business has
historically benefited from the wage controls on labor as well as the state subsidies during
1ST
14 Lustig explains that,
[Although the popularity of de la Madrids government was not high, the
Mexican state had the institutional clout and authority to make

133
corporatist nature of the PSE and the subsequent economic pacts which followed is
unmistakable.
The decision by the government to use the pacts to achieve its goals is intriguing,
since it reveals the use of corporatist (rather than purely liberal) means to ease the
implementation of neoliberal reforms such as fiscal adjustment, privatization and trade
liberalization. The lack of a coherent plan since 1982 had contributed to economic
troubles. When the decision to use a pact was realized, the 1988 economic forecast was
grim, predicting,
135 percent inflation (the highest since the Revolution) and a public deficit
of 18.5 percent of GDP (Whitehead, 1989:183). Since 1982, experts in the
financial sector had been disagreeing on the best remedy for the economic
crisis: shock or no shock, exchange control or no exchange control, and so
on. (Brachet-Marquez 1994:158)
The PSE was renewed four times in 1988. This formal economic pact was the
model for subsequent tripartite pacts, known as the PECEthe Pact for Economic
Stability and Growthduring later years (after 1989). The pacts were bolstered by a
monitoring mechanism (a commission.. .of high-ranking officials from the government
itself and representatives from labor, agriculture and business) that kept policymakers
informed of the performance of the participants in the pact (Lustig 1998:54). Since the
pacts retained corporatist features, they contradicted certain elements of neoliberal reform
packages while simultaneously advancing other aspects of them. The distinctive character
of the pacts is highlighted by the fact that they were set up without the help of the
implementing an incomes policy easier than in other countries. Its
corporatist character provided the government with adequate interlocutors
to implement such a policy... (Lustig 1998:52)

134
International Monetary Fund (IMF) (Aspe 1993:34). These pacts served to control
inflation, evidenced in the decline in the annual rate of inflation from 131.8 percent in 1987
to 9.8 percent in 1993 (Middlebrook 1995:215 and 264). The early pacts regulated prices
in 1988 and 1989 (in contradiction to neoliberal ideals), but price regulations were relaxed
in 1990 and even more so in 1991 (Lustig 1998:111).
The annual national economic pacts were used until the formal pacto process
ended December 31, 1997 (Bierma 1998:3). 15 They served to reformulate the social pact
between the state, traditionally incorporated groups and business. The pacts mended
fences between the state and business, and maintained significant corporatist control over
labor (Heredia 1992:19). Nonetheless, the pacts were the high points of union
participation in national economic policy during the period of neoliberal reforms (de la
Garza 1994:211). The government provided some relief to workers who endured wage
cuts by controlling the price of staples (Lustig 1998: 111).
Elsewhere in Latin America, conflictive business-state relations helped to stimulate
transitions from authoritarian rule and the liberalization of economies, but the Mexican
transition has been muddled (Heredia 1992). In Mexico, the processes of political
change have actually reinforced aspects of authoritarianism:
15 For 1998, on the other hand, budgetary matters were worked out among opposing
parties in Congress, in what Mexican City economist Jonathan Heath has described as true
negotiations with elected representatives:
What finally buried the pacto was the fact that... July 6 [1997] for the first
time you had an opposition Congress...The elections changed the rules of
the game. This year the government had to sit down with Congress and
carry out a true negotiation with representatives who were elected by the
majority of the population .. and not with a few un-elected business or
labor leaders. (Quote cited in Bierma 1998:4.)

135
In contrast to the changes in most authoritarian regimes in the region,
...conflict in Mexican-state-business relations stopped short of rupture and
business elites political activation failed to facilitate a full-fledged
transition to democracy.. .[B]usiness elites have thus far only succeeded in
ushering in a process of partial and segmented political liberalization which
has tended to reinforce, rather than erode, the basic pillars of authoritarian
rule. (Heredia 1992:1)
This is caused largely by the continuing significance of institutionalized corporatist control
over labor, peasant and popular sectors (Heredia 1992:1). As a result, the Mexican
regime did not undergo the same moves away from authoritarianism that many other Latin
American states did during the 1980s, and its economic policies have been affected by this
institutional heritage.
The series of annual national economic and political pacts used in the late 1980s
and 1990s represent formal institutionalizations of old corporatist ties. Although the
intersectoral pacts themselves were created in the 1980s and 1990s, traditional informal
corporatist institutions lie in the foundations of each. Despite the fact that the pacts were
adopted to advance neoliberal economic interests, politically they represented the
continuation of less democratic corporatist institutional forms. Ultimately, the direction of
political and economic change during this decade of neoliberal reforms was significantly
influenced by the informal institutions around which the formal intersectoral pacts were
designed. These pacts are evidence that economic development in Mexico during the
period of neoliberal reforms in Mexico differs in important ways from the neoliberal
ideal.

136
State Institutions Impacting Neoliberal Reforms to the Labor Sector
As discussed above, the successful implementation of the economic solidarity pacts
depended largely on the relationship between labor and the PRI / state. Labor
incorporation is often considered the key to an understanding of the path of a states
political and economic development. 16 To what extent have neoliberal reforms pushed
the labor sector into operating according to neoliberal dictates? This section will show
that although reforms have been quite significant and detrimental to labor, a number of
formal and informal state institutions have continued to influence the pace, direction and
success of neoliberal reforms to the labor sector.
Historical Incorporation of Labor into the Corporatist System
Many state institutions have had an impact on the labor sector over time, and labor
has traditionally played an important role in the corporatist structure of Mexico. The
importance of labor grew at the turn of the 20th century as a result of changes in the
economic base of the economy. The initial incorporation of labor in Latin America took
place in response to,
...the commercial and in some cases also industrial growth that
accompanied the boom of primary product exports in the last decades of
the nineteenth century. Under the impetus of this growth, two new social
sectors were created: a working class in commerce, industry, and
sometimes exports (such as mining), and the middle sectors, whose social,
economic, and political importance had increased rapidly... (Collier 1992:9)
In Mexico, each of these two important new sectors, the working class and the
middle sectors, became incorporated into Mexicos governing regime after the Revolution
16 See, for example, Collier and Collier 1991; Middlebrook 1995.

137
of 1910-1917. The new middle sectors led the organization of the corporatist system and
helped establish a radical populist alliance between the three traditional sectors and the
governing Mexican regime (Collier 1992:11). In 1910, 195,000 workers made up the
labor sector, whereas 11 million peasants and rural workers made up the peasant sector
(Brachet-Marquez 1994:46). Yet the significance of labor relative to the peasant sector
should not be underestimated, despite the large difference in the size of each Of the three
incorporated sectors of the PRI, labor sector has been the strongest and best organized for
collective political action (Cornelius 1996:82).
Although the relationship with labor has been institutionalized for more than eight
decades, the relative power of labor relative to the regime has historically wavered. In the
initial years of the Mexican corporatist system, labor was sometimes able to receive
concessions from the government at the expense of other important groups ^ These
other groups formed a counter-reform alliance that provided a firm challenge to the
position of labor (Collier 1992:12). As a result, the power of labor varied substantially
during the first half of the 20th century, alternating between offensive and defensive
positions relative to the state.
Corporatist incorporation during the early 20th century took place in three phases:
a cautious phase from 1917-1920, and two populist phases, during the 1920s and under
Crdenas in the 1930s (Collier 1992:14). In the first populist period, for example,
presidential candidate Alvaro Obregn signed a secret pact with the major labor
confederation (the Confederacin Regional Obrera Mexicana, or CROM), granting
These other groups included United States interests, national capital, the peasant sector
and the Catholic Church (Collier 1992:17).

138
concessions in exchange for political support (Collier 1992:15). Obregns successor,
president Plutarco Elias Calles was also dependent upon labor as his main source of
support (Collier 1992:16). Following this period, a conservative reaction resulted in the
Maximato (1928-1934), and the strong state-labor alliance fell apart (Collier 1992:23).
Yet the Maximato was followed by the presidency of Lzaro Crdenas (1934-1940),
during which labor and peasant incorporation peaked.
The Crdenas government encouraged the formation of new organizations of
peasants and urban workers, and grouped the new organizations into nationwide
confederations (Cornelius 1996:17). Crdenass legacy continues to be honored by many
Mexicans even to the present day. His deeds include advocating labor- and peasant-
friendly positions:
Crdenas championed the cause of urban and rural workers and committed
the state to intervene in the class struggle on behalf of the working class; he
strengthened working-class organizations to defend their interests and
encouraged workers to strike and demand wage increases, state arbitration
decisions consistently favored labor versus capital; land distribution to
peasants was increased and collective ownership of land was encouraged,
as was the socialization of means of production and the nationalization
and introduction of worker control of firms unwilling to enter into fair
collective bargains; workers came to occupy important political posts at all
levels of government; peasants and workers were armed; socialist
education was introduced into the schools; and the rhetoric of class
struggle and Marxism was adopted. (Collier 1992:25)
The CTM, the state-affiliated labor organization, was formed in 1936 and
supported by Crdenas. Fidel Velzquez, the man who would lead the CTM until his
death at the age of 97 in June 1997, co-founded the organization. Two years later, the
reorganization of the then-governing National Revolutionary Party (PNR) into the Party
of the Mexican Revolution (PRM) under Crdenas took place, which was the key event

139
in the political incorporation of the popular sectors (Collier 1992:30) The ensuing
incorporation compartmentalized organized labor, the peasantry, the military, and the
middle sectors, tying them closely to the presidency, and did much to fortify political
stability (Markiewicz 1993: 79).
This incorporation had a mixed impact on the influence of labor. It left a legacy
that provided for labor representation and influence within the party, yet also left the
system of labor representation open to cooptation and control (Collier 1992:3 1). When
the power of labor was weak, it was forced to provide more support to the state than its
own interests required (Brachet-Marquez 1994:78-79). The capacity of the mass
organizations for autonomous action has often been questioned (e g.. Collier 1992;
Cornelius 1996; de la Cruz 1995). From the 1930s to the 1990s, Fidel Velazquez kept
workers from striking, required them to vote for the PRI, and brokered wage hikes and
other concessions from the PRI government (Bierma 1998:3). These concessions were
always limited
*8 As mentioned earlier, the military sector was abolished in the next presidential term
(Collier 1992:31).
*9 Collier elaborates on the top-down nature of Mexican political incorporation:
By 1940 a much larger proportion of the Mexican population was
nominally included in the national political system, mostly by their
membership in peasant and labor organizations created by Crdenas. No
real democratization of the system resulted from this vast expansion of
political participation, however...[W]orking-class groups[]...influence
over public policy and government priorities after Crdenas was minimal
and highly indirect. Policy recommendations, official actions, nominations
for elective and appointive positions at all levels still emanated from the
central government and official party headquarters in Mexico City, filtering
down the hierarchy to the rank and file for ratification and legitimation.
(Collier 1996: 18-19)

140
Nonetheless, belonging to a CTM-affiliated union did provide benefits. The
system in place by 1940 remained relatively unchanged until the 1970s, corresponding to
the period of IS1. One positive aspect of the incorporation is the close relationship created
between the official party and the official unions, with a built-in flexibility that has allowed
it to endure into the 1990s (de la Cruz 1995:21). The relationship has institutionalized
communications between the two groups. Hence the current weaknesses of labor unions
should not be construed as indications of the rupture of the corporatist system Labor
union weakness relative to the state was an issue in earlier decades as well. The roles of
official labor unions and other state institutions impacting neoliberal reforms in the labor
sector during the 1980s and 1990s are discussed in the following section.
Institutional Continuity during Neoliberal Reforms to the Labor Sector
The state-labor alliance that developed over the course of the 20lh century is an
example of an informal state institution that impacts the implementation of neoliberal
reforms. Many scholars view the era of neoliberal reforms as a time when state-labor
relations changed completely, yet the changes in the state-labor alliance have not been as
severe as some scholars have suggested. Several format state institutions also serve to
perpetuate elements of previous state-labor relations, in contradiction to the aims of
neoliberal reforms in the labor sector.
Informally institutionalized state-labor alliance
Since the power of labor alternated between offensive and defensive positions
relative to the state, continuity in state-labor relations denotes some variation in labor

141
power.20 Beginning in the 1980s, the era of neoliberal reforms created new pressures on
the historic state-labor alliance (Collier 1992:7). During the era of reforms, labor power
has declined. The number of strikes, for example, declined from 675 in 1982 to 39 in
1997 (Dillon 1998). This does not imply that workers are simply more satisfied in the late
1990s. Instead, strike notifications rarely end in actual strikes. For example, in the first 7
months of 1999, there were 3,512 strike notifications, but only 20 ended in actual strikes,
according to the Mexican Secretary of Labor (Zuniga M. 1999). Yet despite the decline in
labor power, state-labor institutions reveal continuities that perpetuate elements of
preexisting state-labor relations developed during the first half of the 20lh century
(Cornelius 1996, Middlebrook 1995, Zapata 1996).
Official labor unions remain important elements of continuity, despite the fact that
the restructuring of Mexicos economy has had a negative impact on the power of labor in
a variety of ways (Cornelius 1996; Middlebrook 1995; Zapata 1996). The system still
provides both labor leaders and the governing elite with incentives to accommodate the
demands of big business and maintain the status quo (Cornelius 1996; Middlebrook 1995).
Trade unions and business chambers recognize their weakness relative to the state, yet at
the same time contribute to the implementation of the states objectives (Zapata
1996:131).
20 This idea of change as continuity is a useful explanatory concept. For example, as
Collier explains, Mexican 20th century history,
is one not only of stability and continuity since the 1910-17 revolution, as
is widely stated, but also of stability with changeboth with institutional
flexibility and adaptability and even with moments of dramatic change and
chellenges to the contours of the system. It is this combination of change
and continuity, or even change qua continuity, which has made the
Mexican picture so puzzling. (Collier 1992:2)

142
CTM leaders have not successfully protected their members during the era of
neoliberal reforms (Warnock 1995). For example, in a labor dispute at Ford of Mexico in
1987, 5,000 workers were laid off, leading to a series of violent confrontations:
... [T]he Company shut its plant, laid off its 5,000 workers and declared the
contract void. A new contract was signed with CTM leaders which cut
wages by 50 percent, and eliminated seniority. When the plant reopened,
only 3,800 workers were hired back. When the union local tried to choose
its own leaders, it was confronted by the company, the police and the
CTM. On January 8, 1990, CTM thugs attacked the workers in the plant.
They even fired on them, killing one and wounding nine others. Ford
workers occupied the plant. At the request of Ford of Mexico, the Salinas
government used the police to remove the workers. (Warnock 1995:122-
123)
(The issue of seniority will be discussed in greater detail below.) These types of horror
stories regarding recent coercive measures by the CTM are all too common. In another,
more recent example, workers at the Han Young plant in Tijuana formed an independent
union in 1997. The Han Young company, the CROC (Revolutionary Confederation of
Workers and Peasants) and the CTM (both government-controlled unions), and local labor
authorities all attempted to impede the independent organizing effort, using tactics such as
firings and threats of death and violence (La Botz 1998:3).
Nonetheless, unionized workers were at some advantage during the initial
implementation of neoliberal reforms, due to previously arranged non-wage employee
benefits:
The government affiliated unions have also helped to maintain political
control by keeping lower-class demand making fragmented. From 1955 to
about 1975, through a steady stream of government-orchestrated wage
increases and expansions of non-wage benefits..., the government created a
privileged elite of unionized workers within the urban working class.
These nonwage benefits served as a cushion during the economic crisis of
the 1980s, partially insulating workers from the ravages of high inflation
and government austerity measures. (Cornelius 1996:82)

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Thus despite the fact that labors power has weakened, the state-labor alliance remains
basically intact (Cornelius 1996; Vargas and Velasco 1999; Zapata 1996).
Breaking the state-labor alliance was considered by some Mexican groups a means
to a