Argument: NAFTA brought in a flood of foreign investment for Mexico
- Alexander Monge-Naranjo. "The Impact of NAFTA on Foreign Direct Investment flows in Mexico and the Excluded Countries." Department of Economics, Northwestern Unweversity. August 2002 - This paper examines the effect of the North American Free Trade Agreement (NAFTA) on flows of foreign direct investment (FDI) received by the Mexico and the countries in the region that were excluded from the treaty. To this end, the paper compares the benefits provided by NAFTA to Mexico with the trade benefits offered by the US to other countries as well as the incentives provided by host countries. I argue that NAFTA gave a significant advantage to Mexico with respect to other countries but that there are also important differences across excluded countries. Specifically, the advantage translated in significantly higher flows for Mexico with respect to the poorer countries in Central American but not with respect to Costa Rica. I argue that the difference is due to a NAFTA bias in the treatment of lowerskill intensive exports. Costa Rica was able to attract massive FDI in higher-skill sectors for which NAFTA did not represent a bias in favor of Mexico.