Mexico and Brazil: A Study of Political Institutions and Sustainable Economic Development

This paper compares the effect of political institutions on economic development in Brazil and Mexico. Between the 1950s and 1970s, both countries experienced unprecedented growth rates of between five and seven percent annually. By the 1980s, however, their economies slowed dramatically, and their development futures, which had previously looked prosperous, appeared grim. The sudden transition from success to failure indicates that certain underlying problems existed during the nations’ miracle growth years. This paper seeks to determine and examine these problems, and analyze how both Mexico and Brazil have worked to remedy these underlying inefficiencies. The analysis begins with an overview of the Solow model, which is the fundamental economic standard used in this paper. According to this model, economic growth occurs through certain exogenous variables, such as total factor productivity, the quality of the labor force, and the investment rate. The paper considers the details of the relationship between economic growth and political systems, particularly focusing on the structure of political institutions and the decisions of policymakers. Both Mexico and Brazil are then analyzed separately through the lens of the Solow model, concentrating especially on how each respective government failed to maximize efficiency, the quality and quantity of the workforce, as well as investment rates. While both Mexico and Brazil mirrored each other in terms of their economic growth throughout the twentieth century, Brazil is now poised to enjoy greater future development success than Mexico due to the decisions and commitment level of its government