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Report No. 1080-ME The Economic Development of the lsthmic Region of Mexico (In Four Volumes) Public Disclosure Authorized Volume 1: The Text March 30, 1976 Latin America and the Caribbean Region FOR OFFICIAL USE ONLY Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Document of the World Bank This document has a restricted distribu Lioni and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without WVorld Ban-k auLhorization. FOR OFFICIAL USE ONLY This Report is based on the findings of a mission which visited Mexico in November 1974. The mission was led by Ian Scott and included: Damianos Hilsaca - Human Resources Thomas Hutcheson - Industrial Economics Ulrich Kllffner - Water Resources Luis Marco (Consultant) - Transport Economics Peter Scherer - Rural Development Rafael Sison - Urban Development Dirk van der Sluijs - Agriculture The mission wishes to acknowledge the invaluable cooperation it received from the Mexican authorities and particularly from the Comision Coordinadora Para El DesarrolloIntegral del Istmo de Tehuantepec. This document has a restricted distribution and may be used by recipients only in the performance of their ofMcial duties. Its contents may not otherwise be disclosed without World Bank authorization. THE ECONOMIC DEVELOPMENT OF THE ISTBMTC REGION OF MEXICO Table of Contents No SUEMART AND COCIUJSIONS .. e....eee,eee.e.eeie.eoeeeee.o.eeoee X - iv CHAPTER 1. THE CONTEXT A. Backgroud * aeooeeeeee,e*Oeee*eeeeeoee*oo* 1 B. Regional Development Policy in Mexico Before 1970 ego,., 1 C. The Spatial Stnr.ctume of the Mexican Econorny ....... 2 ID. The Inplications of the Spatial Order . 5 69096.* .0 . 6 E. The Growth Centre Concept *eeg* 0eCseOeaeo eeo.oe*oeeee 12 F. The Isthmic Region *.. .. X ..e.ag. .@ *..a@ ..... lb4 CHAPTER 2. THE RBGION A. Geography *e .e..geoe0goooeeeee eeeoeo*oeeg 20 Be Demography ,eee.ge ogo gee eoge"eeeeee 22 C. Economic Structure ....... * .**.*,* e.g.e,,,,,, 25 CHAPTER 3. THE DEVELOPET FRAMEWORK Ao ItrodIction *ssve^e¢@ @*ow eee6* 40 Be Human Resources *40,eee@0eooooo eee egeeogee ho C Agriculture ......... 4a COIs gag OO4* G o aosegO geOe a 42 D. Forestry .. g....*g..o.e e*eg 0000 **eeeeOoO Ogo 51 E* Fisheries *4e*eeeeoveeeee*Xe* 52 F. Mining and Petroleum .... og,g ggoeeeQegeGegee 54 Go Manufacturing ,...*se....0 0eo.0 57..o.7 H. Comunications * egg, g .... ego e.ge. e 62 Io Services .G, ** * C*gegeg#*ee.o*Qooeeoe.gge 64 J. All Things Considered .,..eg....O.ge.*.,,*ge *,*Q***** 6 7 CHAPTER 4. TOWARDS A DEVELO}FET STRATEGY A. Orientation .. ge..eo.e..e.*egooeoeoe e g*6*3o *eee 69 B. Quantifying the Objectives .............. ,..*,**,....e0 . e74 C. Urban Development .g.g.e... goggaeoeg .eeeedeo 0 ae a G * O 75 Do Firal Development e.......... o,ae-. Iase,gJIeIsoee**sae * 104 E. Transport Development geg eggege 4.e.eee, ....e e.. e 114 CHAPrER 5. THE NEXT STEP Ao Introdaction **^¢-*XX¢-*eeZ5****@¢@ 135 B. The Institutional Framework 135 C. Implemeritatiorn .. e.. ee geog.ege e egog ea*ege e .gg@e 140 LISr OF FIGURES Number as Referred IBRD After to in Report Serial Number Title Page No. 1. 15601 Composition by Age and Sex in the Istliuus and France, 1970 (Percentage) 22 2.(a) 15600 Welfare Profiles 34 (b) 15599 Welfare Profiles 34 SUMMARY AND CONCLUSIONS i By, comparison with most other parts of Mexicoj the Isthmic region -- defined in this Report to include the whole of the States of Chiapas and Tabasco and portions of the States of Veracruz and Oaxaca -- is remarkable for the contrast between its present relative poverty and its considerable potential for future development. However$ the relative poverty of the region as a whole disguises important intra-regional differences between the fertile and mineral rich coastal plains of Veracruz and Tabasco and the mountainous and less well endowed parts of the region located in Chiapas and Oaxaca. DEVlEOBINT INICATCRs (1970) Indicator Chiapas Oaxaca Veracruz Tabasco Nation Development, Index (Rank Order out of 32) 31 32 15 20 - Value Added per Capita (Rank Order out of 32) 28 32 9 23 - Average Monthly Income per Family (Pesos) 716.6 53702 1576.7 1630.4 1782.0 Incoie Distribution (Ginr Coefficient) .628 .688 .583 .570 o589 Urban Population (as % of total) 28 28 47 33 59 Retail Sales Per Capita (Pesos) 391 288 10214 695 1906 Motor Vehicles per 1I000 Population 0010 0007 0,.016 0.011 0.034 Literacy ( ) 57 58 70 76 76 Infant Mortality (per 1000) 59 60 55 53 66 Dwellings with Piped Water Suppl(96) 38 35 51 34 61 ii. By comparison with the rest of Mexico, the Isthmic region is by no means resource-poor. It has considerable agricultural potential particularly on the Gulf Coast plain and to some extent also in the mountains and on the Pacific Coast. It has abundant petroleum and other mineral wealth, most of which like most of its agricultural potential, is ooncentrated on the Gulf Coast and it has an unequalled supply of water for agriculture, industzy and hydropower generation. Although they are, in relative terms, much less importants the region is also endowed with abundant resources for forestry and fisheries. iii. G;iven this, the obvious question is why the region as a whole has not experienced more development and why, in particular., the Gulf Coast has not moved further ahead? Mexico, after all, has numerous examples of major urban agglomerationss such as Monterrey, where industrial growth has been based on the devtlopment of mining activities in a hinterland area and several other instancess ntably the northwestern cities of Ciudad Obregon, Hermosillo and Culiacan, where urban and regional development has been mainly founded on the growth of agriculture. iv. Thus far however, many of the resources of the Isthmic region have not been developed and those resources that have been developed have been developed in such a way that few of the benefits arising have been enjoyed within the region. Vo With respect to agricultural developments, part of the problem has been that although its soils are fertile and there is abundant water, the latter resource is a mixed blessing because extensive areas of the Gulf Coast are flooded for at least part of the year. Until the coastal plain is drained, much of it cannot therefore be used for crop or livestock production, Another constraint is that although there is much expertise in Mexico concerning agricultural techniques for dry tropical areas, there is relatively little expertise pertaining to the agriculture of the humid tropics. These factors, together with the absence -- relative to other parts of the country - of entrepreneurial initiative and the scarcity of local capital for investment, help explain why agriculture has not, so far, developed on a significant scale. Vi. The enclave nature of the urban-industrial growth which has been associated with the petroleum sector in the Gulf Coast has roots which go back to the beginnings of Mexico's petroleum industry in the first decade of the 20 century when Minatitlan was growing up as an isolated refinery town owned and operated by a foreign enterprise. Despite the expropriation of the petroleum industry in 1938 and its subsequent development as a state monopoly by Petroleos Mexicanos (PENE),, the industry has preserved its enclave characteristics and Minatitlan is still a refinery town although its near-neighbor, Coatzacoalcos, has begun to develop as a diversified industrial port. vii. Enclave development has not however been confined to Minatitlan and with few exceptions, it characterizes most parts of the region. Given this -- and the evidence can be found in every sector and almost every town and city -- the Isthmic region appears as a classical example of a peripheral area within a "core-periphery" framework where the national core is Mexico City. The pattern of its development -- to the extent that development has occurred -- has thus been such that intra-regional linkages have been few, there has been heavy reliance on imported services, internal income multipliers have remained small because incomes generated in the region have generally been spent elsewhere and because investment decisions -- particularly those of Petroleos Mexicanos -- have usually been made in ignorance of what other investors intended to do. viii, This phenomenon is easy to describe but difficult to circumvent. It is clear however, that if the Isthmic region is to be developed in a way that would make sense in tems of a national development strategy, the dependent, enclave, nature of its economy must be modified. Again,* this is easier said than done, But there are several reasons for believing that given the existence of an appropriate set of policies this could be done and that the region could make an important contribution to Mexico's economic growth and development. ix0 Foremost among these reasons is the fact of its highly favorable physical resource endowment, which, ntwithstanding the many impediments to agricultural and industrial growth, is such that in a national perspective the Isthmic region emerges with strong comparative advantages. Second, there is the fact of its relative proximity to the country's major market area of the Guadalajara-Mexico City-Veracruz axis which, relative to almost all other parts of the periphery gives it greater market potential than almost any other part of the country. Further, there is its highly favorable access to the external markets of the Atlantic (the USA and Europe) through the port of Coatzacoalcos and also (in the longer run) its comparative ease of access to the markets of the Pacific via the "land bridge" of the Isthmus. Finally, although the development of the Isthis has hardly begun, a substantial amount of fixed investment is already in place particularly in the petroleum sector and this constitutes another facet of the framework for its future growth.

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