The author traces the new trends of 'growth' in developing economies with special focus on Mexico. The basic hypotheses of the paper are that high financial gains have led to incorrect price signals and that the dynamic sectors have shifted to manufacturing with high import coefficients and falling wages (to compete in the global market). In addition, very low profit rates and even worse employment generation, with wage rates rising much more slowly compared to profits, have resulted in greater inequality of income distribution. The author concludes that economic openness and external capital flows don't guarantee strong and stable economic growth. Productivities will remain low as long as such industries are not linked to internal production. Moreover, wages in the current context are exogenously subdued and hence don't represent productivity gains.

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March 10, 2007.