The Allocation of Children’s Time in Mexico and Peru

Both Mexico and Peru have experienced significant oscillations in incomes and standards of living since the 1980s (Edwards 1995; Robles 1997; Rodríguez and Abler 1998). Due in part to a significant drop in world oil prices and huge external debts on the part of both the Mexican government and private enterprises, Mexico entered a severe economic crisis in the early 1980s. The crisis was characterized by declining incomes and high rates of inflation. The economy rebounded in the late 1980s and early 1990s, with incomes rising and the rate of inflation being reduced to moderate levels. The economy suffered another serious jolt in late 1994 as a result of the government’s decisions to devalue the peso and move to a free floating exchange rate regime. While the economy has for the most part recovered from these shocks, the recovery process is not yet complete. In the case of Peru, the oscillations in living standards have been even more severe. In spite of two stabilization programs, the rate of inflation grew dramatically during 1981-1985 and real per capita income fell by over 10%. Unlike the Mexican government, which pursued more conventional stabilization and structural adjustment programs, the Peruvian government responded in 1985 with a heterodox stabilization program based on reduced foreign debt payments, a price freeze, and major new public programs financed by deficit spending. The program succeeded initially but proved unsustainable due to large government budget deficits and resulting inflationary pressures. The end result, by 1990, was an inflation rate of hyperinflationary proportions and a further 20% drop in real per capita income. The Peruvian government changed course and adopted a more traditional stabilization and structural adjustment program in 1990, and living standards have gradually recovered since 1992. Per capita income currently stands at about the same level as 1985. In the spite of these economic oscillations, both the Mexican and Peruvian economies are now substantially more market-oriented than they were in the early 1980s. Since the mid-1980s in Mexico, and since the early 1990s in Peru, a significant opening to trade and foreign investment has occurred, particularly in Mexico under the North American Free Trade Agreement (NAFTA). In both countries there has also been privatization of state-owned enterprises, tax reform, and deregulation in several economic sectors.