The Socio-Economic Impact of NAFTA's FDI Potential for Mexico

The disruptive impact of Mexico's economic liberalization process will destabilize Mexico's socio-economic framework. If foreign investors fear that Mexico's reform policy may collapse and lead to the creation of a new and unpredictable set of economic and social arrangements, they will withhold their investments. The expected impact of NAFTA on capital inflows to Mexico would be severely eroded. This study shows that the creation of welfare enhancing effects as a result of NAFTA-induced FDI inflows, and the integration of Mexico's economy into international sourcing and production strategies of transnational corporations will take much longer than previously anticipated.