The Chiapas Puzzle
For the twenty years following the Zapatista uprising (1994-2013), the federal government had placed a lot of resources and policy attention in an effort to reduce the large income gaps between Chiapas and the rest of Mexico. Public investment in schools, hospitals, and conditional cash transfer programs had been implemented, resulting in a significant improvement that did reduce the gap in terms of educational and health outcomes. Massive infrastructure projects had been undertaken to upgrade Chiapas' roads, ports and airports, boosting the connectivity of the state with markets within the state and elsewhere in Mexico. And yet, twenty years later the income gap between workers in Chiapas and the rest of Mexico had deepened, and Chiapas remains the poorest state in Mexico, with three quarters of its population poor and close to half in extreme poverty. Large productivity gaps - as proxied by wages - are not only observed between states, but have also expanded dramatically within the three sectors employing two- thirds of the workers in Chiapas: Agriculture, wholesale and retail, and manufacturing. One year into his term as Finance Minister for the government of Enrique Pe a Nieto (2013-2018), Luis Videgaray ponders the statistical evidence available and baffles at the puzzle. The case includes a series of videos featuring Luis Videgaray, Mexico's former Secretary of Finance and Public Credit (2012-2016). In the first video, "The Chiapas Puzzle" (7:41 min.), to be viewed by students in preparation for the class, Mr. Videgaray explains the situation in Chiapas and the dilemmas he and the Mexican Government faced early on. The other three videos, "The Case of Yazaki" (3:55 min.), "Infrastructure and Political Economy" (4:19 min.), and "Takeaways" (5:03 min.) can be played as part of the class discussion. A supplemental slide set is also included with this case.