The Enclave Economy
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From Urban and Industrial Environments

The Enclave Economy

Foreign Investment and Sustainable Development in Mexico's Silicon Valley

By Kevin P. Gallagher and Lyuba Zarsky

Analyzes the extent to which foreign investment in Mexico's information technology sector brought economic, social, and environmental benefits to Guadalajara.

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Analyzes the extent to which foreign investment in Mexico's information technology sector brought economic, social, and environmental benefits to Guadalajara.

Foreign investment has been widely perceived as a panacea for developing countries—as a way to reduce poverty and kick-start sustainable modern industries. The Enclave Economy calls this prescription into question, showing that Mexico's post-NAFTA experience of foreign direct investment in its information technology sector, particularly in the Guadalajara region, did not result in the expected benefits. Charting the rise and fall of Mexico's “Silicon Valley,” the authors explore issues that resonate through much of Latin America and the developing world: the social, economic, and environmental effects of market-driven globalization. In the 1990s, Mexico was a poster child for globalization, throwing open its borders to trade and foreign investment, embracing NAFTA, and ending the government's role in strengthening domestic industry. But The Enclave Economy shows that although Mexico was initially successful in attracting multinational corporations, foreign investments waned in the absence of active government support and as China became increasingly competitive. Moreover, the authors find that foreign investment created an “enclave economy” the benefits of which were confined to an international sector not connected to the wider Mexican economy. In fact, foreign investment put many local IT firms out of business and transferred only limited amounts of environmentally sound technology. The authors suggest policies and strategies that will enable Mexico and other developing countries to foster foreign investment for sustainable development in the future.

Hardcover

$11.75 S | £9.99 ISBN: 9780262072854 224 pp. | 9 in x 6 in 13 figures; 16 tables

Paperback

$5.75 S | £4.99 ISBN: 9780262572422 224 pp. | 9 in x 6 in 13 figures; 16 tables

Endorsements

  • Mexico was the ninth biggest economy in the world and the greatest recipient of foreign direct investment (FDI) in Latin America in 2007. Why has FDI failed to transfer technology, develop cleaner production processes, form human capital, and offer high quality employment specifically in the IT industry in such a country? This book provides excellent reflections on these issues as well as on the inadequate public policies behind these frustrating results. A very valuable contribution to the search for a new, successful economic development strategy for Mexico and other developing countries.

    Claudia Schatan

    Economic Commission for Latin America and the Caribbean, Mexico City, and author of Maquiladoras and the Environment in Mexico