ENCLAVE ECONOMY, THE: FOREIGN INVESTMENT AND SUSTAINABLE DEVELOPMENT IN MEXICO'S SILICON VALLEY

Foreign investment has been widely perceived as a panacea for developing countries--as a way to reduce poverty and jump-start sustainable modern industries. In The Enclave Economy, Kevin Gallagher and Lyuba Zarsky call this prescription into question, showing that Mexico's post-NAFTA experience of foreign direct investment in its information technology sector, particularly in the Guadalajara region, did not result in the expected benefits. Charting the rise and fall of Mexico's "Silicon Valley," they explore issues that resonate through much of Latin America and the developing world: the social, economic, and environmental effects of market-driven globalization. In the 1990s, Mexico was a poster child for globalization, throwing open its borders to trade and foreign investment, embracing NAFTA, and ending the government’s role in strengthening domestic industry. But The Enclave Economy shows that although Mexico was initially successful in attracting multinational corporations, foreign investments waned in the absence of active government support and because China became increasingly competitive. Moreover, foreign investment created an "enclave economy" the benefits of which were confined to an international sector not connected to the wider Mexican economy. In fact, foreign investment put many local IT firms out of business and transferred only limited amounts of environmentally sound technology. Gallagher and Zarsky suggest policies and strategies that will enable Mexico and other developing countries to foster foreign investment for sustainable development in the future.