The Mexican wars of independence (1810-21) left a legacy of economic stagnation that persisted until the 1870s. Political instability and foreign invasion deterred foreign investment, risk-taking, and innovation. Most available capital left with its Spanish owners following independence. Instead of investing in productive enterprises and thereby spurring economic growth, many wealthy Mexicans converted their assets into tangible, secure, and often unproductive property.
The seeds of economic modernization were laid under the restored Republic (1867-76) (see The Restoration, 1867-76, ch. 1). President Benito Juárez (1855-72) sought to attract foreign capital to finance Mexico's economic modernization. His government revised the tax and tariff structure to revitalize the mining industry, and it improved the transportation and communications infrastructure to allow fuller exploitation of the country's natural resources. The government let contracts for construction of a new rail line northward to the United States, and it completed the commercially vital Mexico City-Veracruz railroad, begun in 1837. Protected by high tariffs, Mexico's textile industry doubled its production of processed items between 1854 and 1877. But overall, manufacturing grew only modestly, and economic stagnation continued.
During the Porfiriato (1876-1910), however, Mexico underwent rapid and sustained growth, and laid the foundations for a modern economy. Taking "order and progress" as his watchwords, President José de la Cruz Porfirio Díaz established the rule of law, political stability, and social peace, which brought the increased capital investment that would finance national development and modernization. Rural banditry was suppressed, communications and transportation facilities were modernized, and local customs duties that had hindered domestic trade were abolished.
The Mexican Revolution (1910-20) severely disrupted the Mexican economy, erasing many of the gains achieved during the Porfiriato. The labor force declined sharply, with the economically active share of the population falling from 35 percent in 1910 to 31 percent in 1930. Between 1910 and 1921, the population suffered an overall net decline of 360,000 people. The livestock supply was severely depleted, as thousands of cattle were lost to the depredations of rival militias. Cotton, coffee, and sugarcane went unharvested as workers abandoned the fields either to join or flee the fighting. The result was a precipitous drop in agricultural output. The disruption of communications and rail transportation made distribution unreliable, prompting further reductions in the production of perishable goods. As agricultural and manufacturing output declined, black markets flourished in the major cities. The banking system was shattered, public credit disappeared, and the currency was destroyed. The mining sector suffered huge losses, with gold production falling some 80 percent between 1910 and 1916, and silver and copper output each declining 65 percent.
Data as of June 1996