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close this bookThe Mega-city in Latin America (UNU, 1996, 282 pages)
close this folder8. Mexico City: No longer a leviathan?
View the document(introductory text...)
View the documentIntroduction
View the documentThe Mexican urban structure: the roots of centralism
View the documentThe debt crisis and its aftermath
View the documentMexico City's changing urban structure
View the documentAdministration and finance
View the documentCurrent issues and policy approaches
View the documentConclusions
View the documentNotes
View the documentReferences

(introductory text...)

Allison Rowland and Peter Gordon


When the United Nations issued a report on Mexico City in 1991, it concluded that "in recent years ... projections of Mexico City's population have converged, with most now assuming a population of 25 to 27 million by the end of the century" (UNDIESA, 1991: 7). Only two years later, however, new data combined with assessments of the effects of new national policies cast doubt on whether the city will ever reach this size, let alone do so in less than a decade. An important factor in this reassessment has been the subsequent release of the 1990 population census, which added to a growing conviction that the 1980 data upon which many of the more spectacular projections rested was significantly incorrect. The 1990 data show a much more modest rise than previously expected in the city's population since 1970.

Forecasting error is not the only cause for reconsidering estimates of the future size of Mexico City. The scope and rapidly spreading consequences of economic reforms brought about by President Carlos Salinas de Gortari since 1988 have added credence to projections of a smaller Mexico City.

Internationalization of the Mexican economy since 1986 has had a marked effect on the country's urban structure. Examination of the 1990 population census confirms that on balance people and jobs are no longer moving to Mexico City or to the central region of the country. Recent economic census data tell a similar story, suggesting that these trends will continue because new investment in manufacturing has tended to occur outside the Mexico City region.

If population movements continue to follow the current pattern of deconcentrated economic expansion, the doomsday scenarios for an overcrowded, unmanageable Mexico City should be rethought. More importantly, the policies and proposals designed to cope with traffic congestion, air pollution, water, housing, and solid waste disposal have to be reassessed. The cost of dealing with these problems may be less than previously predicted.

The Mexican urban structure: the roots of centralism

Mexico is similar to most other Latin American countries in so far as a high degree of urban primacy has become the norm. The roots of this pattern are found in the historical concentration of political power, economic activity, and population (Davis, 1994; Garza and Schteingart, 1978; Gwynne, 1985; Scott, 1982). Subsequent industrialization accentuated this pattern; investment was concentrated in the largest cities: Mexico City, Guadalajara, and Monterrey. The availability of jobs attracted large numbers of migrants to those cities (figure 8.1).

By 1950, Mexico City was home to 12.3 per cent of the national population, while the two next largest urban areas, Guadalajara and Monterrey, together accounted for only 3.2 per cent of the national total (table 8.1). By 1970, the shares of all three cities had grown, to 17.9 per cent for Mexico City, 3.0 per cent for Guadalajara, and 2.4 per cent for Monterrey; by 1990, the shares were 18.5 per cent, 3.5 per cent, and 3.2 per cent respectively. By 1950, Mexico City accounted for 25 per cent of all persons employed in manufacturing industry, a level of dominance that peaked at 42.1 per cent in 1970 (table 8.2).

Spatial concentration in Mexico was accentuated by import-substituting industrialization (Gwynne, 1985: 84-5; Portes, 1990). Other government policies aggravated these centralizing tendencies. During the 1960s and 1970s, most public investment in water, education, power, and transport was directed at urban areas, with Mexico City receiving the highest share. In addition, direct and indirect subsidies for water, corn, electric power, diesel fuel, and public transport offered special advantages to Mexico City (Garza and Schteingart, 1978; Scott, 1982).

Figure 8.1 Mexico City: The metropolitan region

Deliberate government efforts to reverse this concentration of industrial activity were ineffective and sometimes counterproductive. The most serious problem was that few decentralization policies took the differing potentials of the regions into account. Thus, a limited amount of public investment was spread over a wide and undifferentiated periphery - not surprisingly, to limited effect (Scott, 1982). More targeted policies during the 1970s, for example industrial complexes and parks, had little effect on industrial location (Aguilar-Barajas, 1990).

Table 8.1 Population of Mexico's ten largest urban areas, 1950,1970, and 1990

Population (000s)


Urban Area






Mexico City

Federal District/Mexico












Nuevo Leon























Cd. Juárez













Baja California










National population




Source: Respective national censuses.

Table 8.2 Manufacturing employment, 1950,1970, and 1988 (numbers of employees)




Mexico City




National total




Mexico City as % of nation




Sources: Derived from Garza, 1987, and Gordon et al., 1993.

While the maquiladora programme has successfully increased economic activity on the border with the United States and has attracted substantial migration to the border cities, the maquilas have generally failed to generate significant industrial linkages or to stimulate growth in other parts of Mexico (Scott, 1982; Wilson, 1992).

The debt crisis and its aftermath

The import-substituting industrialization model came to an abrupt end with the Mexican debt crisis of 1982. Subsequent macroeconomic policies, implemented at the behest of the International Monetary Fund and foreign banks as a condition for loan rescheduling, attempted to restrain public spending, liberalize the economy, and attract foreign investment. The initial result of these policies was severe recession. However, since 1986 real GDP growth has revived, reaching 1.4 per cent in 1987, 3.1 per cent in 1989, and 2.6 per cent in 1991.1

Table 8.3 Growth in manufacturing, commercial, and service sectors, 1985-88



Average annual growth (%)

Border states




Mexico City



- 0.9





National minus border states




Sources: Derived from Rowland, 1992, and INEGI, 1989.

Domestic and foreign investment flows responded to the liberalization measures - in some cases in anticipation of the implementation of the North American Free Trade Agreement (NAFTA). Direct foreign investment of only US$491 million in 1985 had increased to $4,762 million by 1991; as a proportion of GNP this represents a rise from 0.3 per cent to 1.7 per cent.

The new export-oriented economic model, combined with the effects of structural adjustment, has had striking effects on the distribution of manufacturing, commercial, and service employment nationwide. The most significant changes are the decline in Mexico City and the growth of the northern border region. Between 1985 and 1988, employment in the border states grew at almost three times the national average, while the net number of jobs in Mexico City fell (table 8.3). Export-oriented production favoured cities with ports, those along the northern border, and those in areas with natural resources (Gordon et al., 1993; Pradilla, 1990; Rowland, 1992). Most such cities are outside the previously favoured region of central Mexico.

Entry into NAFTA is likely to continue this trend and bring benefits for particular industrial sectors. In the context of an overall rise in employment, the "winners" are generally predicted to be apparel, footwear, pottery, leather, furniture, services, construction materials, beverages, plastics, and rubber. The "losers" are expected to be chemicals, machinery, paper, non-ferrous metals, and tobacco (Gordon et al., 1993).

Mexico City may well continue to lose out relative to other areas if these forecasts are correct. Gordon et al. (1993) suggest that supplier links with growing areas and sectors of the economy are weak for those establishments located in the capital. Therefore the impact of the country's economic liberalization will depend primarily on the extent to which the city remains a national centre for finance and capital.

The other, less quantifiable, national trend affecting economic growth in Mexico City lies in the country's political structure. Traditionally highly centralized and tightly controlled by the dominant political party, the Institutional Revolutionary Party (PRI), the political system has in recent years become more open to opposition parties and more responsive to local conditions. If this trend continues, the need for large companies to put their headquarters in Mexico City may diminish. The vast labour force employed in the government bureaucracy may also be reduced or even dispersed to other parts of the country.

In the past, agglomeration economies, local market size and wealth, and direct contact with the national government played important roles in the spatial structure of the Mexican urban system. However, in the 1980s, as export markets became more significant, production processes worldwide changed, and transportation and communication facilities in Mexico improved, traditional location factors lessened in importance for many firms. At the same time, congestion costs in Mexico City increased and evidence of polarization reversal began to appear (Gilbert, 1993b: 731; Portes, 1990; Richardson, 1989). One outcome was the gradual emergence of a polycentric spatial structure in central Mexico: an antidote to both the exhaustion of agglomeration economies and crippling congestion.

Mexico City's changing urban structure

Population growth and decentralization

The results of the 1990 census suggest that two significant changes have occurred in Mexico City. First, population growth has slowed (table 8.4). Between 1970 and 1990, average annual population growth for Mexico City was half of what the 1970 to 1980 data suggested. The explanation for this depends on the credibility accorded the 1980 census figures. If they are discarded, we can conclude that population growth fell gradually over the twenty-year period. If not, the 1980 data suggest that rapid metropolitan growth continued through the 1970s and then fell off sharply in the 1980s, presumably in response to the economic crisis beginning in 1982. However, this view implies that average annual growth plummeted from 4.4 per cent in the 1970s to 0.2 per cent in the 1980s. A drop of this extent is unlikely.

Table 8.4 Population growth in Mexico City, 1970-1990

Total population

Average annual growth (%)

Share of population







Mexico City total







Central City



- 1.1

- 2.2



First Ring







Second Ring







Third Ring







Source: Gordon, 1992.

Mexico City Ring definitions:
Central City
DF: Benito Juárez, Cuauhtémoc, Miguel Hidalgo, Venustiano Carranza.
First Ring:
DF: Azcapotzalco, Coyoacán, Cuajimalpa, Gustavo A. Madero, Iztacalco, Iztapalapa, Alvaro Obregón. State of Mexico: Naucalpán, Netzahualcóyotl
Second Ring:
DF: Magdalena Contreras, Tláhuac, Tlalpán, Xochimilco. State of Mexico: Atizapán de Zaragoza, Chimalhuacán, Coacalco, Cuautitlán Izcalli, Ecatepec, Huixquilucán, La Paz, Tlalnepantla de Baz, Tultitlán.
Third Ring:
DF: Milpa Alta. State of Mexico: Chalco, Chiautla, Chicoloapán, Chiconcuac, Cuautitlán, Ixtapaluca, Melchor Ocampo, Nicolás Romero, Tecamac, Tultepec.

The second change has been an acceleration in the pace of decentralization of population from the centre of the city towards more recently urbanized areas. Beginning in the 1950s, the Mexico City Metropolitan Zone has grown beyond the original boundaries of what is now referred to as the Central City (the present-day delegations of Benito Juárez, Cuauhtémoc, Miguel Hidalgo, and Venustiano Carranza) to include increasing numbers of delegations in the Federal District and municipalities in the adjoining State of Mexico (Garza and Schteingart, 1978) (figure 8.2). Three additional "rings" of settlement have been incorporated into Mexico City since that time (Negrete-Salas et al., 1993). The movement of population from the Central City toward the outermost rings began in the 1950s and accelerated through the following decades (Garza and Schteingart, 1978: 70). The bulk of the population now lives in the First and Second Rings, while the Second and Third Rings have been growing most rapidly. The Central City is in decline; its population in 1990 was only two-thirds of its 1970 total.

Figure 8.2 Mexico City: Administrative divisions

Trends in employment location in Mexico City

Garza and Schteingart (1978: 63) report that Mexico City's share of the country's industrial firms has been in decline since the early 1960s. Table 8.5 shows that industrial employment in Mexico City peaked around 1980, and has declined since then. Within the capital there has been a strong trend towards decentralization. Table 8.6 shows that the central city has been growing less rapidly than the outer rings ever since the 1960s, a process that intensified in the 1980s.

Table 8.5 Industrial employment by ring, 1960-1988







Mexico City total







Central City







First Ring







Second Ringa







Third Ringa







Sources: Derived from Garza, 1987, and INEGI, 1989.
a. For consistency with historical records, the municipalities of Huixquilucán and Chimalhua can have been excluded from the Second Ring data for 1985 and 1988, while Chiautla, Chicoloapan, Chiconcuac, Melchor Ocampo, and Tultepec have been excluded from Third Ring data for 1985 and 1988.

Table 8.6 Average annual growth rates in industrial employment by nag, 1960-1988 (percentages)


1970 80




Mexico City total



- 11.6

- 7.0

- 4.8

Central City



- 14.4

- 8.4

- 6.0

First Ring



- 8.2

- 5.0

- 3.2

Second Ringa



- 17.2

- 9.9

- 7.5

Third Ringa






Sources: Derived from Garza, 1987, and INEGI, 1989.

a. For consistency with historical records, the municipalities of Huixquilucán and Chimalhua can have been excluded from the Second Ring data for 1985 and 1988, while Chiautla, Chicoloapan, Chiconcuac, Melchor Ocampo, and Tultepec have been excluded from Third Ring data for 1985 and 1988.

Not surprisingly, the most recent data show a pattern of employment decentralization within Mexico City similar to the movement in population. Table 8.7 shows that employment grew only in the Third Ring. There were large job losses in manufacturing in the Second Ring, but the commerce and services sectors recorded high growth rates, albeit less than those of the Third Ring. At higher levels of disaggregation some sectors did grow in the inner rings (for example wholesaling and some service sectors), but the general trend is for faster growth outside the central area.

Table 8.7 Average annual growth of employment by sector, 1985-1988 (percentages)





Mexico City total


- 4.7



Central City


- 6.0

- 0.2


First Ring


- 3.2



Second Ring


- 7.4



Third Ring





Source: Derived from INEGI, 1989.

Table 8.8 Metropolitan employment by sector, 1985 and 1988













Central City


















First Ring











42.6 48.2






Second Ring


















Third Ring



























Source: Derived from INEGI, 1989.

Examination of the changing shares of economic activity presents a less clear picture of decentralization (see table 8.8). Overall, the Third Ring increased its share of employment, but at the expense of the First and Second Rings rather than the Central City. While the Second Ring lost manufacturing employment to the First and Third, it gained in commerce and services. These apparently contradictory trends can be explained by the observation that between 1985 and 1988, the metropolitan area as a whole lost over 113,000 jobs in manufacturing - 5 per cent of its total employment in this sector.

Aguilar (1993) has documented this general pattern of spatial deconcentration in manufacturing between 1975 and 1985. Working with more highly disaggregated employment data, he shows how certain types of manufacturing and service activities are more likely to decentralize from the city centre than others. Firms serving local markets move out, presumably following the suburbanizing population while those with links to national and international markets are more likely to remain in the centre. He sees a resurgence of "high technology" industries, such as electronics, as well as printing and publishing in the central area, between 1975 and 1985. His disaggregated service-sector data show decentralization in consumer services, while business services remained in the central city.

Both the employment data and the population data tell the same story: Mexico City continues to decentralize rapidly. The doomsday scenarios regarding pollution, traffic congestion, and other problems associated with a large and concentrated population are being challenged by adjustments in patterns of economic activity in the metropolitan region and nationwide. However, a number of serious difficulties remain for the city in the areas of urban administration and finance, housing, urban services, air pollution, and traffic management.

Administration and finance

Urban administration

City management, service provision, and the coordination of public agencies are inevitably complex in an urban area the size of Mexico City. However, these tasks are further complicated by the fact that Mexico City has spilled across the political boundaries of the Federal District (DF) into the State of Mexico (figure 8.3). This process began in the early 1950s, when restrictions on residential and industrial expansion, rent control, rising land costs, and increasing congestion in the DF encouraged new households and businesses to locate just over the border. There, land-use regulations - including restrictions on sales of previously non-urban land - were less likely to be enforced, offering business opportunities for land developers and ejidatarios, as well as lower-priced land for impoverished families (Cymet, 1992; Garza and Schteingart, 1978).2 At the other end of the income spectrum, new developments in the hilly western parts of the city offered attractive sites for high-income residents fleeing the congestion and deterioration of the central area.

Newly arrived migrants to the city, as well as relocating residents, have tended to settle increasingly at the urban periphery, where housing densities are lower (Gilbert and Ward, 1982; Negrete-Salas et al., 1993). The metropolitan municipalities located in the State of Mexico now have nearly as many residents as the Federal District, and one-third of all formal-sector jobs. Despite this, these municipalities have enjoyed minimal official contact with the DF in terms of planning, regulation, and service provision.

Figure 8.3 Mexico City: Changing rates of population growth by rings of metropolitan development, 1950-1990 (Source: Negrete-Salas et al., 1993)

A number of difficulties are posed by the dual government jurisdictions. Mass transit rarely crosses boundaries between the DF and the State of Mexico, forcing mid-trip transfers for most passengers. Prices for basic services, including public transportation, water, and electric power, are also several times higher in the State of Mexico than in the DE (Damián, 1991). Worst of all, public-service levels and living standards are much lower in the State of Mexico; unemployment and fertility rates are higher while school attendance and literacy rates are lower (Rowland, 1993).

Part of the explanation for this differential lies in the very different governmental systems which operate within the two political jurisdictions. In the DF, government is headed by a mayor (regente), who is appointed by the national president and holds a cabinet post. Most city-wide planning tasks are undertaken by the Departamento del Distrito Federal (DDF), whose leaders are appointed by the mayor. For administrative purposes, the DF is divided into sixteen delegations, each of which is headed by a delegado, also appointed by the mayor in consultation with the national president. These delegados are in charge of most forms of local service provision, including street maintenance, water, and drainage. Community representation is formally provided by block representatives (jefes de manzana), who serve on a neighbourhood council ( junta de vecinos) and are directly elected by residents. The neighbourhood councils select a president to serve on a delegation-wide neighbourhood council, and these sixteen delegation-wide councils each send a representative to the DF's Consultative Council.

There are four major problems with this structure. First, the system produces elected bodies that have no executive powers; they serve only in an advisory role on matters selected by the mayor's team. The main purpose of this system, according to most analysts, is to control rather than to satisfy community demands. The second major criticism is that even these local elections are apparently manipulated by the delegados to ensure compliant delegation councils and consultative councils (Aguilar, 1988; Gilbert and Ward, 1985; Jiménez, 1989; Ward, 1990b). Third, the effectiveness of the block committees is undermined by other significant channels of community participation, including PRI organizations like the National Confederation of Popular Organizations (the official PRI channel for urban popular demands), urban ejido commissioners, and the National Coordination of the Urban Popular Movement (an umbrella organization of leftist, non-PRI, urban popular movements), all of which may circumvent the formal structure of community participation and deal directly with delegados or even the DDF. Finally, many of the most important community demands, for example for land regularization or electricity services, fall beyond the power of the juntas and delegados (Aguilar, 1988).

Municipalities in the State of Mexico benefit to some extent from metropolitan-wide activities undertaken by the DDF. For all other matters, they depend on the governor of the State of Mexico, the only formal link between them and between this part of the metropolitan area and the DF. The governor is elected by popular vote; municipal representatives are similarly elected to the State legislature. Each municipality elects a municipal president and council, but their roles are curtailed by their very limited funding.

Urban finance

Analysis of urban finance is complicated by the jurisdictional division between the DF and the State of Mexico and by the status of the Federal District as national capital. The jurisdictional division means that resources available for different parts of the city and different projects vary greatly. The DF benefits both from resources available through the DDF and from direct allocations from various federal ministries and programmes. The complexities of these arrangements are beyond the scope of this chapter, but it is clear that the DF does much better than the State of Mexico. For example, Rodríguez (1993: 138) discovered that of the 19 per cent of the 1987 federal budget allocated to regional development nationwide, more than half was spent on the DF. As a result, when compared with other cities in developing countries, the degree of dependence on federal grants in the DF is very high and its dependence on local taxes low (table 8.9). In addition, because the DF is the national capital, any financial mismanagement is more likely to be tolerated. In 1985, when the DDF managed to accumulate loan obligations amounting to nearly half of its budget, the federal government came to its aid with credits and subsidies (Villalpando, 1989).

Table 8.9 Financing of local public expenditure in selected LDC cities and Mexico City

Locally raised revenue (%)

Revenue from outside sources (%)

Local taxes

Self financing services


Grants and shared taxes

Net borrowing

Median LDC cities,







Mexico City, 1987












Sources: Bahl and Linn, 1992: 34-5, and derived from INEGI 1990: 92 9 and 149.
a. Conurbated municipalities of the State of Mexico only.

Table 8.10 Mexico City revenue and expenditure, 1987 (thousands of pesos per capita)

Total revenue

Federal revenue sharing




User fees















Total Mexico








Total expenditure

Administrative costs

Public works & promotion












Total Mexico City





Source: Derived from INEGI, 1990b: 92-9 and 149.
a. Conurbated municipalities of the State of Mexico only.

Does not include expenditures for debt service and interest on debt.
Data not available for State of Mexico municipalities of Tultepec and Melchor Ocampo.

In contrast, the amount of money available to the conurbated municipalities of the State of Mexico is much smaller than the DDF budget. The municipalities do benefit from spending by state and federal agencies, particularly for infrastructure and environmental projects, but total state spending in the municipalities is far less than the amount spent by federal agencies in the DF. The DDF is much more effective than its counterparts in the State of Mexico at collecting taxes, duties, and user fees (table 8.10). Part of the explanation lies in the greater number of corporate headquarters located within the DF, as well as the higher number of collection points for duties and user fees. Again, however, the importance of federal transfers to the DF is critical.

Although Mexico is structured on the principles of fiscal federalism, the pattern of transfers from the central government serves to limit the ability of the system both to respond efficiently to local needs and and to link services received to payments in the form of service fees and property taxes. The problem is exacerbated by the federal government's tendency to rely on parastatal agencies for much of its income (despite recent waves of privatization), and the lack of local accountability, stemming from weak levels of local political competition (Crane, 1990: 4). Thus, the system leaves little opportunity for local initiative or discretion.

Two major, but unsuccessful, attempts have been made to reform the system. The 1980-81 tax reform replaced most state and local revenue sources with a national value-added tax, to be allocated to the local authorities on a basis proportional to amounts collected. In 1982-83, another attempt at fiscal reform, Article 115 of the Constitution, ostensibly devolved power from the federal and state authorities to the local level. This gave local governments responsibility for many new local service functions, which they were to finance through their newly established monopoly over property taxes. Neither of these policies functioned as designed, because steps that were subsequently taken to make the reforms more palatable to state governors allowed them to maintain control over local government finance (Crane, 1990; Davis, 1991; Rodriguez, 1993).

A role for metropolitan government?

Many observers have suggested that a single metropolitan institutional structure would provide a simplification and clarity of purpose that is currently lacking in Mexico City's administration. The coordination of planning between the two jurisdictions would encourage greater compatibility in terms of goals, rules and regulations. Several attempts have been made to coordinate better the wide range of activities and regulations of the two jurisdictions, beginning in 1976 with the Commission of the Conurbation of the Centre of the Country, and followed in 1988 by the Council of the Metropolitan Area of the Federal District and the State of Mexico. These efforts were largely ineffective and short-lived, both suffering from a lack of executive power and a lack of will to cooperate among agencies (Cornelius and Craig, 1991; Rowland, 1993; Ward, 1990b; Wilk, 1992). A recent exception to this pattern is the creation of the Metropolitan Commission for the Prevention and Control of Environmental Pollution in the Valley of Mexico. Formed in 1992, the Commission consists of representatives from eight national ministries, three parastatal agencies, and the governments of the DF and the State of Mexico. It appears to have achieved some success in planning, monitoring, and enforcing air-quality programmes (Lacy, 1993; Wilk, 1992). Cooperation on a wider range of issues is more difficult, both administratively and politically. Combining finance and expenditure processes, for example, would require that the rules for such processes be more transparent and well-regulated than they are now. It might also run the political risk of increasing public pressure to do more for the poorer municipalities in the State of Mexico.

The ongoing shift in population and economic activity from the DF to the suburbs within the State of Mexico will have significant effects on both jurisdictions. Revenues, especially from taxes, are likely to decline in the DF as the deconcentration continues. Meanwhile, municipalities beyond the DF continue to grow, primarily owing to migration from older parts of the city, and will soon surpass the DF in population. This will put additional pressure on already strained municipal governments and may increase the demand for changes in the administrative system.

Current issues and policy approaches

Income, employment, and social services in the 1980s

When harmful macroeconomic policies are abandoned, there is often a further deterioration in economic conditions before any sort of turnaround is achieved. This has been the experience in much of Latin America, Eastern Europe, and the countries of the former USSR. In addition, the conditions for optimal policy transitions are not yet well understood (Van Wijubergen, 1992). Both factors apply to Mexico, where the 1980s are often referred to as "the lost decade." Government-imposed wage restraints and a new system for setting minimum wages resulted in substantial drops in formal-sector real wages between 1982 and 1985-86. Nationwide, real average wages dropped by 30 per cent during this period, minimum wages saw a similar decline, and general manufacturing wages fell by 35 per cent in real terms (Gonzalez and Escobar, 1991; Lustig, 1990).

However, Lustig (1990) points out that a drastic decline in wages may not translate into an equivalent loss in total household income. Wage income represents a smaller share of poor families' incomes than it does of that of wealthier families. It appears, then, that middle-and upper-middle-income households (who generally rely more on wage income than do poorer families) bore more of the brunt of adjustment arising from this decline in real wages. On the other hand, nonwage incomes actually rose slightly between 1981 and 1984. However, this gain is explained more by a rise in profits (generally accruing to the rich) than to increases in the incomes of self-employed owners (generally the informal sector), so it is unlikely that these small increases could compensate households for larger losses in wage incomes. Finally, as Lustig (1990) notes, even small absolute and relative declines in incomes of the poorest households can exacerbate already severe conditions.

Falling real wages help explain how, while output declined sharply for Mexican firms in the early 1980s, the open unemployment rate did not rise dramatically. Firms were able to reduce their labour costs and the government could cut its own expenditure through a combination of layoffs and wage cuts. In spite of this the actual number of unemployed is reported to have risen from 2.7 million to 4.6 million between 1981 and 1984. In addition, underemployment rose, as workers were forced into lower-paying and less productive jobs, often in the informal sector (Lustig, 1990). Indeed, according to one report, informal employment in Mexico rose faster between 1980 and 1987 than in most other Latin American countries (Gonzalez and Escobar, 1991).

Not surprisingly, the effects of falling wages and shifting employment patterns on the distribution of income is not straightforward. In fact, it is not clear whether income inequality rose or fell in Mexico in the 1980s.3 Lustig asserts that the economic crises and subsequent structural-adjustment process decimated the Mexican middle class, while wealth was increasingly concentrated in the hands of the rich between 1981 and 1985 (Lustig, 1990). Lorey and Mostkoff-Linares (1993) examine the economic fortunes of various occupational groups and income strata through the 1980s. They conclude that "... the evidence from the 1990 census is perplexing. Data on both income and occupation imply that the situation in the 1980s was characterized by a clustering of population in the lowest middle-class and highest lower-class subgroups rather than by a dramatically increasing misery at the lowest levels of Mexican society."

Other standard social indicators for the 1980s, also point to an ambiguous picture of the impacts of Mexico's economic crisis. Indeed, Hirschman (1994: 344) reports that "during the 1980s, when indexes of economic performance leveled off or declined in some Latin American countries under the impact of the debt crisis, important social indicators, such as infant mortality, illiteracy, and the extent of birth control continued showing improvement." Adjustments at the household level to falling incomes and to workers involved in lowerproductivity activities appear to have had an effect on school enrolments and infant nutrition. Primary and secondary school enrolment dropped relative to the number of eligible children in the early 1980s. Although aggregate health indicators, such as infant mortality rates, did not rise, illness and mortality were more frequently related to poor nutrition. These nutritional deficiencies may also be related to the government's move away from general food subsidies toward more targeted programmes. Though defensible from a fiscal standpoint, rising food prices for those poor households no longer included in these programmes may have led to nutrition problems (Lustig, 1990). On the other hand, shrinking per capita outlays on education, public health, and social security are not necessarily an indication of lower service levels. Lustig (1990: 1337) concludes that these figures actually reflect the declining wages of workers and a lack of new investment in these sectors.

Housing and urban services

Over half of all housing in Mexico City consists of self-help structures in various states of consolidation (Azuela, 1990; UNDIESA, 1991). Self-help housing is concentrated primarily in the State of Mexico, where enforcement of prohibitions on construction on unauthorized sites has traditionally been less stringent. Unlike the situation in other Latin American cities, land invasions have not been common in recent decades. More typical are illegal subdivisions of private and ejido land: it is estimated that 9 to 10 million people live on land that has been developed in these "irregular" ways (Connolly, 1988; Coulomb and Duhau, 1989; Schteingart, 1989; Ward, 1990a). The result has often been settlements on land poorly suited for service provision; on the steep, rocky slopes of volcanoes to the south-west of the city and on the desiccated lake beds to the east, prone to flooding during the rainy season and dust storms during the dry months.

Few other options for home ownership exist for the poor, given the limited reach of public-sector housing (see below). The traditional, irregular forms of providing land for housing the poor in Mexico City may be drying up, as bans on squatting in territorial reserves, as well as on illegal subdivisions and ejido sales, are being more stringently enforced (Ward, 1990a). This is partly a response to competition in the land market from developers of middle-class housing (Connolly, 1988). As a result, population densities and land prices are increasing in lowincome areas. Rental accommodation is the tenure choice of increasing numbers of Mexico residents, even though the proportion of renters is declining (Coulomb and Sanchez, 1991; Gilbert, 1993a: 55).

Questions about the legality of landholdings plague housing development of all types. But while some high-income neighbourhoods have been built on irregularly obtained land, the issue of land tenure is particularly vexing in low-income, self-help settlements. Security of tenure is generally cited by residents of irregular settlements as the single most important issue they face (Aguilar, 1988; Jiménez, 1989; Varley, 1993). Unfortunately, regularization is often complicated by uncertain land records and the overlap of jurisdictions of various government agencies, particularly for former ejido lands. In addition, tenure issues offer ample opportunity for the political jockeying and influence peddling which often accompanies highly sensitive and rather arbitrary procedures in Mexico.

There is some disagreement among researchers over the degree to which regularization continues to be used by local officials primarily as a political tool. Ward maintains that since the late 1970s, land regularization has become more systematic and technical, a process motivated by concern to incorporate residents into the tax base, recover costs of service infrastructure investment, and exert greater authority over planning and building (Ward, 1990a; Ward, 1990b). Varley (1993), in contrast, argues that in spite of increased bureaucratization, the PRI still exercises a great deal of control over the timing and location of regularization. In her view, land-tenure regularization continues to serve as a means for demobilizing non-PRI political movements in low-income neighbourhoods and maintaining political stability in the city.

Political patronage and co-optation is also a motive for constructing public housing. Mexico City is notable for the large number of agencies which have been involved with public housing construction, sometimes working cooperatively, and at other times at odds with one another. The most prominent agency in the construction of housing for low-income residents is the Trust Fund for Popular Housing (FONHAPO), which has also been important in sites and services schemes and in the earthquake rebuilding programme. Two major housing funds for employees are also active in publicsector housing: the National Institute of the Fund for Workers' Housing (INFONAVIT), whose membership is limited to registered blue-collar workers, and the Housing Fund for State Workers (FOVISSSTE), which serves state employees. Both funds are supported by mandatory payments in the form of fixed percentages of workers' salaries (Ward, 1990b: 417). State credit guarantees toward the purchase of privately built housing are also available to certain low-income workers through Central Bank of Mexico programmes called the Fund for Banking Operations and Discounts to Housing (FOVI) and the Fund for the Guarantee and Support of Housing Credit (FOGA). These public-sector housing agencies have played a significant role in housing provision in Mexico City since 1970. Whereas only 10 per cent of the population lived in housing produced by one of the various forms of government intervention in 1970, by 1985 over 20 per cent benefited from state assistance (Connolly, 1988: 168; Ward, 1990b: 419). A special agency, Popular Housing Renewal, was also set up following the 1985 earthquake; it built 54,000 units in the central area for highly subsidized purchase by newly homeless low-income residents (Gilbert, 1993a; Ward, 1990b).

Only about 15 per cent of the housing in Mexico City consists of private, single-family units built on legally obtained land (Dowall and Wilk, 1989). This type of housing is concentrated in a relatively small number of expensive neighbourhoods, populated by the wealthiest Mexico City residents.

Urban service provision is a major problem in the city. Of course, those who can afford to pay the prevailing user fees for urban services have no difficulty obtaining them; heavy government investment in basic water, drainage, electricity, and other systems, as well as generally competent and non-politicized management of these agencies, has greatly increased capacity (Gilbert and Ward, 1985). However, the situation is very different in low-income and irregular neighbourhoods. There the inhabitants are more likely to find themselves at the mercy of political manoeuvring. Indeed, some authors posit a link between regularization and the ability to demand and receive urban services (Ward, 1990b), although others cite examples of illegal settlements dealing directly with the utilities to obtain water or electricity services (Aguilar, 1988; Varley, 1993). What is clear is that services are obtained gradually by lower-income residents, and servicing depends in part upon their ability to organize and make their demands known.

In Mexico City, 91 per cent of housing units have some type of sewerage connection, 94 per cent have piped water, 64 per cent have in-house water, and 99 per cent have electricity. But household service provision varies widely both between neighbourhoods and between the DF and the conurbated municipalities of the State of Mexico. Sewer connection rates are 95 per cent in the DF and 85 per cent in the State of Mexico, piped water 97 per cent and 91 per cent, and in-house water 72 per cent and 54 per cent (Rowland, 1993).

Water provision and disposal

Water has to be pumped up to Mexico City over the surrounding mountains from areas far from the metropolitan area. The cost of provision has become increasingly high as the main local supplies, the water table beneath the city and the agricultural lands to the south, have become depleted. At the same time, the frequent failure to collect service fees has also discouraged maintenance and extension of service to newly settled low-income areas.4

Water disposal is an even more serious problem. Because the Valley of Mexico lacks a natural outlet, both sewage and storm water tend to accumulate. Sewage-treatment plants do not run at full capacity and cannot satisfy the city's needs. The collection system is also in disrepair, suffering from old age as well as from damage sustained in the 1985 earthquake. As a result, particularly in poor areas, sewage is collected in poorly maintained septic tanks or left in the open air. In the wet season, surface runoff must be pumped out of the valley or allowed to run northward with the sewage, where it is often used for irrigation. The highly permeable soil to the south of the city is not able to cleanse the drainage water and the subsoil aquifer is increasingly contaminated.

Air pollution

The most pressing environmental problem faced by Mexico City is its air pollution. In 1991, international norms were exceeded in the city centre on no less than 307 days. In other parts of the city they were exceeded anywhere from 232 days in the north-eastern zone to 325 days in the south-west (Lacy, 1993: 27). The source of the problem is similar to that in other large cities, but an unfortunate combination of natural phenomena accentuates what would otherwise just be a major nuisance. Surrounded by mountains in a basin 2,240 metres above sea level, the metropolitan region suffers from very stable air. In winter, thermal inversions trap cold, stagnant air beneath the level of the mountains. At the same time, the sunshine at this latitude produces photochemical smog 60 per cent more efficiently than the sunshine in Los Angeles (Lacy, 1993: 45). In addition, altitude increases automobile emissions and the high-octane gasoline required for combustion at this level also has a high lead content. To make matters worse, people are more susceptible to the negative effects of pollution at high altitude. As Walsh (1989, quoted in UN, 1991: 22) puts it: "if one was asked to design a city with characteristics conducive to high air pollution, one could not do a much better job than has been done in the Valley of Mexico."

Transport is the primary source of air pollution in Mexico City, with the private automobile contributing almost half of all emissions (table 8.11). Exacerbating the problem is the deteriorated state of so many vehicles. Even rudimentary pollution-control devices are rare. In a voluntary emission-testing programme of 600,000 vehicles conducted from 1986 to 1988, 70 per cent of petrol-driven vehicles and 85 per cent of diesel vehicles failed to meet the standards (Walsh, 1989: 23). Unfortunately, as the number of private cars increases, petrol consumption is growing rapidly: deliveries to retailers in 1991 were 22

Table 8.11 Sources of emissions, Valley of Mexico, 1989

Sector and source

% of total emissions

Weighted by toxicity of emission




Private automobiles


Gasoline trucks


Combis and minibuses




Diesel trucks


State of Mexico buses


Ruta-100 (DF buses)


Others (trains, planes, etc.)


Industry and Trade












Thermo-electric production


Ecological factors



Eroded areas


Fires and other processes





Source: Derived from Lacy, 1993. per cent higher than in 1986 (Lacy, 1993: 50). Should car ownership continue to increase, air pollution is likely to become worse.

Industry is not a major source of pollution, although it does contribute most of the sulphur dioxide. In addition, the number of commercial and service establishments using polluting processes, such as restaurants, hotels, dry cleaners, public baths, and bakeries, is growing.

The first serious attempts to reduce air pollution were begun in 1986. In 1991, these efforts were stepped up with the announcement of the Integrated Programme against Atmospheric Pollution (PICCA). This programme was undertaken by the Salinas administration in conjunction with the Comisión Metropolitana and the private sector. The total cost of the programme between 1990 and 1994 has been estimated at over US$4.7 billion (Lacy, 1993: 61).

Perhaps the best-known anti-pollution effort is the Hoy no circula programme, which forbids driving one day per week in the Federal District. A variety of other measures directed toward private vehicles include mandatory catalytic converters, a compulsory vehicle-inspection programme, and improvements to traffic controls and roads. New types of fuel including unleaded petrol and low-sulphur diesel fuel, have also been developed by PEMEX to lower harmful emissions.

Measures are also being taken to increase usage of the mass-transit system. These include the gradual extension of the metro system into the State of Mexico, the expansion of the trolley-bus network, the construction of a light train along Avenida Zaragoza, and the introduction of luxury buses. A major programme is also under way to reduce pollution from public transport, including fitting catalytic converters to taxis, combis, and microbuses and replacing 3,500 Ruta-100 buses with newer models (Lacy, 1993: 64).

The closure of PEMEX's 18 de Marzo refinery in 1991, at a reported cost of US$500 million, was the most dramatic step yet taken against industrial pollution. However, additional measures include a ban on new contaminating industries, agreements with existing companies aimed at controlling their emissions, continuous monitoring of the worst polluters, and mandatory switching from petrol and diesel fuels to natural gas. The two thermo-electric power plants serving the metropolitan area have been almost entirely converted to natural gas. They have been also instructed to suspend operations during thermal inversions (Lacy, 1993: 65-6).

The likelihood of success of these pollution-abatement programmes remains to be seen. Even if fully enacted - rarely the case in previous efforts - many programmes will take years before they are effective. This is particularly true of those that rely on improvements to the fleet of private road vehicles, since the average age of these is so high. Retrofitting with improved pollution-control equipment is difficult to implement and virtually impossible to enforce. Other programmes, such as Hoy no circula, are easily subverted and possibly contribute to increased vehicle sales. What is more, progress in some areas may actually worsen other types of environmental damage. For example, the unleaded fuel introduced by PEMEX may have led to increased ozone levels (Walsh, 1989: 23).

Table 8.12 Modal split of transportation in Mexico City, 1985


% of total daily person-tripsa

Private autos




DF Buses


State of Mexico buses


Combis and shared taxis


Trolleys and streetcars


Source: UNDIESA, 1991.
a. Figures are rounded.

Fortunately, the deconcentration of population and economic activity from the city centre to the suburbs and from Mexico City to other regions of the country suggests that the problem of air pollution may not be wholly intractable. The development of urban sub-centres may help to contain average commuting times and reduce industrial pollution (Gordon and Richardson, 1993).

Transport policy

Transport congestion is a major problem. The government's main response has been to try to reduce reliance on the private automobile and to increase the use of public transport. Unfortunately, the main tool used to achieve this goal, highly subsidized fares, has had little impact on the modal split (table 8.12). Those presently without cars take the metro if it goes near their destination, but otherwise rely on buses or collective taxis (Walsh, 1989: 26). The real problem, however, is rising car ownership. Once people own a car, they use it. With car ownership likely to grow faster than population and incomes, congestion is bound to get worse.

Of course, the current trend towards deconcentration of population and employment can be expected to help traffic management. As Ward (1990b: 97) points out, the emergence of new centres of employment, commerce, and services has allowed people to fulfil most of their daily needs within a limited sector of the city. He claims that average journey times for most residents have not increased much in recent years, an observation which is consistent with data from cities in developed countries.


The recently observed tendency for the rate of population growth in Mexico City to slow, together with the spatial deconcentration of population and employment within the metropolitan area, is good news for national and local policy-makers. Many doomsday scenarios had been based on the expectation of housing, infrastructure, and services falling further behind the rapidly growing population. It now appears that the authorities may finally have a chance to catch up with these problems. There is much scope for improvement in living conditions for low-income residents in particular. Unfortunately, the effectiveness of policy in this area, for example, greater "rationalization" of land-tenure regularization, depends greatly on changes in the political system. Such changes are extremely difficult to predict, especially given the current volatility of Mexican politics. In addition, difficulties in financing and implementing projects will continue to be complicated further by the conflicts and overlaps between the city's two political jurisdictions. However, the PICCA programme, designed by the Comisión Metropolitana, offers evidence that these difficulties can be overcome once the political will has been mustered.

It is interesting that many of the changes in Mexico City and the national urban system have come about after a decade of severely constrained resources. During the 1980s, the country's efforts were more closely focused on international debt problems and macroeconomic policy than on metropolitan and regional goals. The economic liberalization undertaken by Mexico, however, has done more in less than a decade to further the goals of regional decentralization than any set of programmes devised for that purpose. In this irony Mexico is not alone; the same trends have been noted in other developing countries as well. As Gilbert (1993b: 733) points out: "The great paradox of polarisation reversal is that regional policy has contributed very little to it. Deconcentration has occurred in practice when regional planning was at its weakest."

While Mexico City will continue to face the tough problems of housing and service provision and environmental degradation, the evidence presented here suggests that in terms of settlement patterns the effects of continued liberalization are mostly benign. Now that NAFTA has been signed it is to be hoped that the effects of continued integration into the world economic system will work in the same direction.


1. This paper was written before the devaluation of December 1994 and Mexico's subsequent economic recession.

2. Ejidos were established after the Mexican Revolution as inalienable areas of community land; ejidararios are members of the community.

3. Gini coefficients for the country have stayed remarkably stable for decades, according to a variety of sources (Ahluwalia et al., 1979; Paukert, 1973). For example, nationwide Gini coefficients between 1950 and 1990 remained near 0.53 with no obvious trend (1990 value calculated by E. Zepeda). Although metropolitan data are seldom available, Gini coefficients derived for Mexico City reflect a distribution that is less unequal than that of the nation as a whole, with a value of 0.49 (E. Zepeda, personal communication, 1994).

4. System losses may reach as high as 30 per cent (UNDIESA, 1991: 21).


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