Global Change and Local Economic Restructuring: The Case of Mexico City Thesis submitted for the degree of Doctor of Philosophy (PhD) by Miguel Ángel Jiménez Godínez Department of Geography & Environment London School of Economics and Political Science 2015 To Tomas & Chela 2 Acknowledgements …it takes a lot of things to change the world: anger and tenacity, science and indignation, the quick initiative, the long reflection, the cold patience and the infinite perseverance, the understanding of the particular case and the understanding of the ensemble. Only the lessons of reality can teach us to transform reality. Bertolt Brecht, Einverstandnis First of all I would like to thank Susana Berruecos, my wife, who gave me support and friendship and who gracefully took care of me during the unforgettable time we spent at the LSE in London. She also read different versions of several of my arguments at different stages of this thesis, and her advice (especially in academic matters) has always been greatly appreciated. I owe a special debt of gratitude to my supervisors, Gareth Jones and Andrew Thornley, for their invaluable help. They provided clear intellectual guidance, academic stimulus, and endless personal support which encouraged me to carry this project to its conclusion. Many of the ideas were discussed and refined in my graduate seminar at the Geography Department. I also benefited from the opportunity to interact and discuss ideas and empirical findings with department staff, to whom I owe special thanks, particularly Sylvia Chant, Yvonne Rydin, Ian Gordon, Diane Perrons and Andy Pratt. Other advisors and critics on whose help I have relied include Saskia Sassen (on whose ideas I have often drawn), David Harvey, Christine Kessides and Francisco Gaetani, from whom I received helpful comments on the basic ideas for my work. I have benefited from helpful discussions with and comments from George Philip, Soledad Loaeza and Francisco Panizza. The feedback provided by the seminar on Mexico (chaired by George Philip) was invaluable, as were in-depth discussions at The Beavers Pub with Osvaldo Santín, Alberto Peredo, Iván Pliego, Juan Pardinas, Jesús López, Iris Hauswirth, John Smith, Asato Saito, Abel Pérez, Javier Sánchez, Jorge Vera, Sophya Skyers, Ertan Zibel, Murat Yalgintan, Keho Shih, Debora Cavalcanti and Eduardo Rodríguez. All involved deserve special thanks for their insightful suggestions. I also gratefully acknowledge the financial support provided by CONACYT, the Department of Geography at the LSE and the British Council. Last for not least, my gratitude to my son Jorge, endless source of inspiration and support, and to Sofi my daughter, the best part of me, simply the best daughter in the world. 3 Abstract This thesis is about economic transformation in Mexico City between 1980 and 2000. It explores the extent to which Mexico City’s economic restructuring process has been caused by trade liberalisation. The thesis assesses the extent to which industries located in Mexico City reacted to a reorientation in production focus, characterised by the shift from national to international markets. It analyses in detail the pace and geography of neo-liberal economic change, and its effects upon a specific location. It also evaluates the role played by global economic agents in gauging the forces influencing economic restructuring in Mexico, and particularly in Mexico City. At the core of this restructuring process is the change in regional industrial location patterns in Mexico, as well as the decline of manufacturing – with regard to production and employment – in Mexico City and its rise as a service centre. The thesis therefore engages with current debates on new economic geography on the one hand and globalisation on the other, focusing attention on the possible emergence of a group of “global” urban centres embedded in a broader network of cities in developed and developing countries alike, which connect global production circuits and coordinate global/regional markets. More concretely, the thesis focuses on the automotive and consumer electronics industries with the aim of understanding the causes and effects of economic events in terms of location decisions, particularly those made by transnational corporations. By placing the empirical processes of economic restructuring within the theoretical context of trade liberalisation and globalisation, I seek to make an original contribution to social science debates about the way industry reacts to economic signals and how global processes, despite taking place in specific locations, have wide-reaching effects upon social welfare, mainly though the transformation of local labour markets. 4 Contents List of Tables 7 List of Figures 9 List of Boxes 9 List of Acronyms 10 Chapter One: Introduction Overview 13 Context 14 The Research Hypothesis: Krugman’s Trade Regime and Industrial Concentration 24 An Alternative Hypothesis: Globalisation, Post-Fordism and Cities 27 Methodological Approach 30 Conclusion and Thesis Organisation 37 Chapter Two: Production, Markets and the Role of Centrality in the Global Economy Overview 41 The New Economic Geography 42 The Globalisation Debates 48 Globalisation and Regionalisation of Markets 61 The Role of Centrality in the Global Economy and the Global City Hypothesis 65 Globalisation and Economic Agglomerations 68 Conclusion 72 Chapter Three: Global Integration and Economic Restructuring in Mexico Overview 75 Krugman’s Liberalisation of Trade Hypothesis 79 The Mexican Economy According to the Top 500 Companies 84 Mexico City vs Border Region: Trade and Location 97 Economic restructuring among the Top 500: Constructing a Global Index 102 Linear Correlation Results 106 PCA Empirical Results 109 Conclusion 121 Chapter Four: Global and Local Actors, Economic Restructuring and Location Decisions: the Case of the Automotive Industry Overview 124 The Automotive Industry: A Case for Globalisation 125 The Automotive Industry in the NAFTA Region 132 The Automotive Industry in Mexico 139 Automotive Industry Trends in Mexico 144 5 The Automotive Industry and the Krugman Hypothesis 152 The Top 100 Companies in the Automotive Industry 158 Patterns of Employment Concentration in Mexico’s Automotive Sector 162 Conclusion 168 Chapter Five: Transformation at the Sector Level: The Case of the Consumer Electronics Industry Overview 172 The Global Consumer Electronics Sector 174 The Consumer Electronics Industry in Mexico 187 The Consumer Electronics Sector and Mexico City’s Industrial De-concentration 200 Conclusion 215 Chapter Six: The Transformation of Mexico City Overview 218 Manufacturing Decline in Mexico City 219 The Rise of the Service Sector in Mexico City 226 TNC Headquarters and the Financial Sector in Mexico City 229 Economic Restructuring and Social Polarisation in Mexico City 235 Conclusion 253 Chapter Seven: Conclusions: The Effects of Centrality in a Global Economy Overview 256 Research Findings 258 Appendices Appendix 1: Performance of the Automotive and Consumer Electronics Sectors 272 Appendix 2: Top 100 Mexican Companies According to the Globality Index, 2000 281 Appendix 3: Top 100 Mexican Companies According to the Globality Index, 2006. 284 Appendix 4: Social Indicators Questionnaire 287 Appendix 5:List of Interviews 296 References 298 6 List of Tables 1.1: Population Distribution by Locality Size 14 1.2 Manufacturing Employment in the Federal District and States of Central Mexico, 1980–1998 18 1.3: Average Tariff Requirements for Industry, 1984–1990 21 3.1: Share of Manufacturing GDP by Region, 1980-1998 82 3.2: Average GDP Growth Rate and Regional Employment Share by Region – Manufacturing Sector, 1980–1998 82 3.3: Top 500 Companies Profile, 1980–2006 87 3.4: Evolution of State-Owned Companies in Mexico, 1920–1996 89 3.5: The Top Ten Companies, 1980–2006 91 3.6: Percentage of Foreign Capital Shares in Top 500 Companies in Mexico in 2000 92 3.7: Countries of Origin of Foreign Investment in the Top 500, 2006 94 3.8: Companies Profile: Mexico City vs Border States, 2000 99 3.9: Year of Starting Operations, Location and Export to NAFTA Region 102 3.10: List of Global Proxy Variables 105 3.11: Variable Correlations 107 3.12: Factor Analysis Model 110 3.13: Top 500 and Top 100 Distribution by Sector, 2000 114 3.14:Main Characteristics of the Top 100 Global Companies and Expansión 500, 2000 115 3.15: Top 100 Companies in 2000 and 2006 118 4.1: Top Automotive Producers, 1981–2000 127 4.2: Domestic and Foreign Production of Passenger Cars by the World’s Leading Producers, 1998 129 4.3: The Automotive Industry: Shares in International Trade by Region 130 4.4: Passenger Vehicle Sales (million of units) and Market Share by Automaker Home Country: Western Europe, Japan and US, 1982–1995 131 4.5: Hourly Compensation Costs for Production Workers in Motor Vehicles and Equipment Manufacturing, Selected Countries, Various Years (US$) 134 4.6: Ford Productivity Levels in North American Plants 138 4.7: Major Car Producers in Mexico, 1991 and 2000 145 4.8: Vehicle Production, National Sales and Exports, 1980–2000 147 4.9: Exports of Motor Vehicles by Destination, 1980–2000 148 4.10: Automotive Plants in Mexico: Starting Operations, Locations and Distances 156 4.11: National Distribution of Automobile Plants at State Level, 2000 159 7 4.12: Location of the Top 100 Automotive Companies in Mexico 161 4.13: Employment Shares, Selected States, Branch-Level Information on Concentration Patterns in the Automotive Sector, 1980 163 4.14: Share in Automotive Employment by Region, 1980–1998 168 4.15: Labour Concentration Index for the Mexican Automotive Industry, 1998 168 5.1: Manufacturing Employment, Annual Average Growth Rate, 1980–2000 181 5.2: Consumer Electronics as Percentage of Total Manufacturing, 1980–2000 181 5.3: Top Global Consumer Electronics Companies, 1980–2000 182 5.4: World Ranking and Share of Consumer Electronics in Electronic Exports , 2000 186 5.5: Consumer Electronics Average Growth Rate, 1981–1996 188 5.6: Mexican Exports to the US, 1993–2000 189 5.7.