CIAO DATE: 06/05

The New Federalism, Internationalization and Political Change in Mexico: A Theoretical Analysis of the Metalclad Case

Abstract

In this working paper the reader will find a study of the case that led, within the North America Free Trade Agreement, to the first formal dispute between an American firm and the Mexican Government. The firm, Metalclad, invested $22 million in the municipality of Guadalcazar, in the state of San Luis Potosi, to build a plant to process and store industrial waste. The proper disposal and storage of industrial waste represents one of the toughest environmental challenges faced by Mexico. Thus, the federal government, in the 1990s, has made efforts to attract foreign investment to this area. Metalclad, however, got into a dispute with the municipal and state governments. Finally, in December 1995, the former officially denied Metalclad a construction permit for the plant. This action meant, in practice, the end of the investment project.

The case is presented in the paper as an example of changes in Mexican politics leading to decentralization and "new federalism." Theoretically, the paper uses the case to explore two research questions linking Mexican politics and international relations. The first looks at the possible impact decentralization has over the international bargaining capacity of the executive. To do so the paper applies a two-level game model. The second assesses the impact of external variables on political change in Mexico.

Full Text (PDF, 30 pages, 1.95 MB)