The paper opens with an examination of the characteristics of international financial flows to Mexico in recent years. These included a tremendous increase in volume, especially of portfolio investment, since 1987; a concentration of funds in short-term, high interest government debt; a concentration of foreign direct investment in a narrow range of export-oriented industries; and an unprecedented increase in the volume and value of international trade.

The author then analyzes the policy and institutional changes undertaken by the Mexican Government over the last decade to facilitate the globalization of the Mexican economy. These included negotiations of a number of trade agreements and the removal of trade barriers, including protection of the agriculture sector; modification of laws regulating foreign investment; constitutional reform to facilitate transfer of land rights and private management of natural resources; suppression of wages; stimulation of the maquiladora sector; and privatizations of state-owned assets. The author cites the privatization of infrastructure development (toll roads and ports) and power generation and distribution capacity to illustrate the linkage between these policy and institutuional changes and environmental concerns, and to raise questions about the integrity of the decision-making process.

The next section of the paper describes how a change in strategy from public sector-led to market-led development entailed a fundamental change in economic decision-making, and an emphasis on creating a favorable investment climate at the expense of social and environmental goods. This profound reorientation required abandonning protected markets and a "highly articulated system of social balance among groups" and adopting a neo-liberal agenda in which private investment decisions would determine the sectoral and geographic characteristics of economic growth. Of the portfolio of policies employed to achieve these new goals, the greatest focus was on suppressing wage levels to boost international competitiveness.

The author then goes on to analyze the direct and indirect impacts of structural adjustment on the environment, emphasizing that the decline in purchasing power of many segments of society (peasants, industrial workers and the middle class) since 1976, which was exacerbated by the currency crisis of December 1994, has pushed people into marginal economic activities which in turn degrade the environment. For example, a decrease in real wages has forced people to postpone maintenance and investment in capital improvements in their factories, fields, businesses and homes.

The author explores two specific examples linking financial globalization to the environmental sustainability of Mexico's development path. First, he outlines some of the negative environmental impacts of fast growth in the maquiladora industry along the U.S.-Mexican border, including lack of fresh water and conflicts over water rights, air pollution, unregulated toxic waste disposal, lack of adequate sewage systems and other problems related to the population's overwhelming existing infrastructure. He notes that the implementation of NAFTA has at least resulted in a greater recognition of and more information about these problems. He highlights the problem of inadequate human and financial resources at the local level to manage these problems, and concludes that a new binational, regional approach to planning is required.

The author's second example relates to the changing role of primary production in Mexico in an era of international economic integration, with which he raises the question of whether the benefits created by profound transformations in land tenure and production can offset the social costs of the associated massive dislocations. In particular, he describes how traditional stakeholders, including indigenous peoples and peasant society, have been marginalized in public policy related to food production as the government has reoriented policies away from traditional systems and toward higher valued agricultural products. He notes that Mexico's peasantry has resisted this tide, and suggests that an alternative strategy of according rural communities greater autonomy and compensating them for their environmental stewardship services that they provide.

The paper also includes a brief discussion of the private sector's role in environmental improvement and other institutional issues. The author describes recent private sector environmental initiatives as designed to forestall direct government intervention, and argues that it is time to focus not just on "end of the pipe" solutions characteristic of the school of "eco-efficiency" but on "more integral approaches to correcting the environmental impact of present productive systems." He suggests that while institutional structures to deal with the environmental consequences of globalization are inadequate aggravated by conflicts of interest, the Commission for Environmental Cooperation (CEC) has become effective in channeling dithe discussion about the respective responsibilities of private industry and government into more productive directions.

The paper concludes with a treatment of implications for the public interest community. First, the author cites a need for increased information and education regarding the potential environmental and other benefits to be gained from alternative development strategies being forged by rural communities. Second, private industry should be engaged in a discussion regarding the differences between remedial and preventative approaches to environmental quality, as well as on the urgency of growth management. Third, the CEC should be defended as a forum for discussion and a relatively impartial watchdog group. Finally, far-sighted environmental advocates in the Mexican government need the chance -- through broader discussion and study -- to inform economic planners of the long-term environmental sustainability of various investment options.