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Abstract: When Mexico, the United States, and Canada approved the North American Free Trade Agreement (NAFTA) in late 1993, many observers predicted that the historic agreement's passage would have the greatest impact on Mexico, opening the country's previously closed economy and helping the nation become a viable player in the global economy. Otto Granados Roldan, governor of the small state of Aguascalientes in north-central Mexico, was one of those believers. By developing the state's infrastructure and services, improving existing policies to attract large foreign investors, and providing training and support to local companies, Granados was convinced he could help Aguascalientes reap the potential benefits of NAFTA—from increased local exports to burgeoning international investments. In the coming years, Granados achieved some of his goals, but also encountered serious obstacles. Within a year of NAFTA's passage, the governor had to speedily reconfigure his implementation plan when a political and financial crisis torpedoed the Mexican economy. In addition, many small local firms failed despite government attempts to prepare and support them in their transition to a more open economy. Moreover, while the state succeeded in attracting a surge of maquiladoras—firms that assembled imported materials into products for immediate export—many maquiladoras soon left in search of even cheaper wages and production sites. In 1998, a new governor instituted yet another round of changes to help the state adapt and thrive in the post-NAFTA world.
Learning Objective: This three-part case follows the implementation of NAFTA in Aguascalientes over a ten-year period, from the early planning of Governor Granados through the ongoing challenges facing the succeeding administration. It allows for discussion of what sorts of public investments and incentives might help a regional economy find its place in the global economic order, and of the role of political leadership in that process.