The Road Not Taken: Why Mexico’s Economy Didn’t Become an ‘Asian Tiger’

For decades, economists and investors have looked at Mexico with a mix of optimism and puzzlement. With a strategic location bordering the world’s largest consumer market, abundant natural resources, and a young, dynamic population, Mexico seems to possess all the ingredients for an economic miracle. The signing of the North American Free Trade Agreement (NAFTA) in 1994 was supposed to be the catalyst that would launch it into the league of developed nations.

Yet, three decades later, while the Mexican economy has certainly grown, it hasn’t achieved the explosive, transformative leap seen in the “Asian Tiger” economies like South Korea, Taiwan, or Singapore. Productivity has stagnated, wage growth has been sluggish, and deep structural inequalities persist. Why?

According to a compelling argument by Professor Juan Flores Zendejas of the University of Geneva, Mexico’s fundamental mistake was not a lack of ambition, but a flawed strategy. While it opened its doors to global trade, it failed to adopt the proven, state-guided, export-led development model that turned East Asian nations into economic powerhouses. Instead of building its own industrial champions, Mexico became a highly efficient, yet ultimately dependent, cog in a machine built by others.

This analysis offers crucial insights for anyone involved in international finance, from institutional investors to business leaders considering nearshoring opportunities. Understanding the path Mexico took—and the one it didn’t—is key to navigating its complex economic landscape today.

The East Asian Miracle: A Blueprint for Growth

To understand Mexico’s story, we must first look at the “Asian Tiger” playbook. Far from a pure free-market approach, the success of countries like South Korea was built on a pragmatic and powerful partnership between the state and the private sector. This model, often called “state-directed capitalism,” involved a deliberate and strategic industrial policy with several key components:

• High National Savings and Directed Credit: Governments actively encouraged high domestic savings rates. This pool of capital wasn’t left to the whims of the market. Instead, through state-influenced banking systems, the government directed credit at low interest rates to specific, strategic industries—think shipbuilding, steel, and later, electronics. This wasn’t about picking winners randomly; it was about building the foundational industries of a modern economy.
• Protection of Infant Industries: While the ultimate goal was to dominate global exports, these nations fiercely protected their nascent industries from foreign competition in the early stages. This gave companies like Samsung and Hyundai the breathing room to scale, innovate, and achieve efficiency before being thrown into the ring with established global giants.
• Export Discipline as a Litmus Test: This protectionism wasn’t a blank check. Government support was conditional. Firms were expected to become globally competitive and meet stringent export targets. Success in the international market was the ultimate proof that the strategy was working. This fusion of protection at home and competition abroad created disciplined, world-class corporations.
• Building Domestic Supply Chains: The goal was never just to assemble foreign parts. The strategy focused on building deep, integrated domestic supply chains. A Korean car was to be made with Korean steel, Korean electronics, and Korean ingenuity. This approach captured value at every stage of production, fostering a virtuous cycle of innovation, job creation, and technological advancement.

This model was a masterclass in long-term economic planning, prioritizing national industrial sovereignty and value creation over the short-term benefits of unfettered free trade.

Mexico’s Bet on NAFTA: A Different Strategy

In the 1980s and 90s, emerging