Cronies, rents and import licenses: non-tariff trade controls throughout Import Substitution Industrialisation (ISI) in Mexico

The thesis fills a gap in the literature about Import-substituting Industrialisation (ISI) by analysing non-tariff trade controls – mainly import licenses. The principal focus is on Mexico, a case that has not been analysed in detail. The core questions addressed include: which specific pattern licensing followed; what was the economic rationale behind such pattern; is there evidence that non-tariff controls were ‘captured’ that is, facilitating rent-seeking? In order to answer these questions, the project takes a qualitative and quantitative approach, using primary evidence gathered in archives as well as statistics from secondary sources, which are combined in novel ways. Chapter I reviews the literature on rent-seeking and on Mexican trade and industrial policies. Chapter II provides an overview of the macroeconomic context of ISI in Mexico. Chapter III presents the qualitative evidence, exploring the allocation of import licenses in nine industries, and shows how politically connected firms either obtained licenses (which gave them an advantage via cheaper inputs) or manage to block competing imports (thus earning monopoly rents). Chapter IV provides descriptive statistics of the licensing system, and demonstrates that the policy lacked internal consistency - the overwhelming majority of products were protected for far longer than officially specified, and that illegal source of rents from trade –smuggling and “free perimeters”- were significant. The main findings, which shed light on larger debates about ISI are that excessive protectionism was neither effective nor sustainable and that cronyism characterised the post-Second World War process of industrialisation in Mexico.