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Espacios Públicos ISSN: 1665-8140 [email protected] Universidad Autónoma del Estado de México México Becerril Velasco, Christian Iván The experience of the Mexican state with the conditional cash transfer programmes to alleviate poverty Espacios Públicos, vol. 18, núm. 44, septiembre-diciembre, 2015, pp. 71-100 Universidad Autónoma del Estado de México Toluca, México Available in: http://www.redalyc.org/articulo.oa?id=67644589004 How to cite Complete issue Scientific Information System More information about this article Network of Scientific Journals from Latin America, the Caribbean, Spain and Portugal Journal's homepage in redalyc.org Non-profit academic project, developed under the open access initiative The experience of the Mexican state with the conditional cash transfer programmes to alleviate poverty La experiencia del Estado mexicano con los programas de transferencias monetarias condicionadas para reducir la pobreza Fecha de recepción: 30 de octubre de 2014 Fecha de aprobación: 7 de junio de 2015 Christian Iván Becerril Velasco* abstRact For more than fifteen uninterrupted years, conditional cash transfer programmes (ccts) have been used with the purpose of alleviating poverty in Mexico. However, there is little evidence that proves that the programme is achieving its main goal. In recent decades, it has been demonstrated that within developing countries poverty has been alleviated more effectively in countries where the labour market has been strongly institutionalized. Using a mixture of qualitative and quantitative methods, we assessed the extent to which the weakness of the institutional capacities of the Mexican state, among other important factors, has impeded the current Mexican cct programme known as Oportunidades from achieving its main goal. Our results show that the weakness of the institutional capacities of the Mexican state makes poverty alleviation much less likely to occur because it impedes the provision of training and labour market policies that complement the programme and enable the poor to move out of poverty. Key woRds: State, institutions, poverty, inequality, employment. Resumen Por más de quince años los programas de transferencias monetarias condicionadas (tmcs) se han utilizado en México con el fin de reducir la pobreza. Sin embargo, hay poca evidencia que demuestre que el programa esté logrando su objetivo principal. En las últimas décadas se ha demostrado que entre los países en vías de desarrollo la pobreza ha disminuido en aquellos países en los que el mercado laboral ha sido fuertemente institucionalizado. Utilizando una mezcla de métodos cualitativos y cuantitativos, se evaluó el grado en que la debilidad institucional del Estado mexicano, entre otros factores importantes, ha impedido al tmc mexicano, conocido como Oportunidades, alcanzar su objetivo principal. Nuestros resultados muestran que la debilidad institucional del Estado mexicano impide la provisión de políticas de empleo y capacitación que complementen al programa y permitan a los beneficiarios salir de la pobreza. PalabRas clave: Estado, instituciones, pobreza, desigualdad, empleo. * University of York, Reino Unido. Correo-e de contacto: [email protected] , Issn 1665-8140, núm. 44, septiembre-diciembre 2015, pp. 71-100 The experience of the Mexican state with the conditional cash transfer programmes to alleviate poverty 72 IntRoductIon and the openness of economic sectors, in order to allow the markets to adjust properly – on The 1980s represented a breaking-point in their own dynamics – to the new conditions the social, economic and political history and challenges that the new global order of Mexico. From the 1930s to the early presented. Paradoxically, the socio-economic 1970s, based on the Import Substitution conditions of the citizens during this period Industrialization (isi) system, Mexico’s Gross were worsened especially due to the deep cuts Domestic Product (gdp) grew at a relatively in social spending, which meant a regression in rapid pace (3% per year in per capita terms), as the advancement of the social rights that had a result of which it was known as the ‘Mexican been attained in the first half of the twentieth miracle’ (Esquivel, 2010: 4-5). However, century. In the last two decades Latin American not only was the Mexican state unable to countries have undertaken a path towards the develop any productive sector that allowed the equalization of the poor´s socio economic country to compete internationally, but it also conditions with the implementation of the depended mostly on international loans and Conditional Cash Transfer Programmes (ccts), the profits from oil to sustain the isi system which would allow them to have access to (Moreno-Brid, Pardinas and Ros, 2009: 156- basic services such as health and education, 158). In this context, the globalization of the acquiring capabilities that enable them to economy and the fall of the oil prices during the obtain sustained income in the labour market late 1970s had serious effects on the Mexican to move out of poverty by their own efforts. economy and in 1982 Mexico suffered a high Evaluations of the Mexican ccts Progresa- debt crisis, bringing about large devaluations Oportunidades have been quite encouraging and high levels of inflation, which triggered a (Molyneux, 2008; Soares, Ribas and Osório huge increase in the levels of unemployment, 2010; González, 2012; and others). These income inequality and poverty (understood at evaluations have demonstrated significant that time as nutritional). impacts on the well-being of the recipients, Consequently, following recommendations such as increasing school attendance, improving from the International Monetary Fund (imf) health outcomes and reducing income inequality and later on from the World Bank, like most while families or recipients belong to the of the Latin American countries, Mexico programme, among other short-term effects. started a process of structural adjustment However, there is little evidence that shows and economic reforms with the intention of that the programme’s ex-recipients are able to achieving macroeconomic stability, increasing obtain sustained income in the labour market, s o employment and reducing income inequality which might leave them vulnerable to the shocks l cu and poverty (Robertson, 2007: 1380). The so- of the economy and to falling into poverty rtí called Washington-Consensus reforms started again. A relevant question now would then be a y to be implemented in the early 1980s and if the evaluations of Progresa-Oportunidades s o basically comprised two main market-oriented have shown positive results in increasing the y sa strategies, the reduction of the size of the state educational levels of the ex-recipients what is n e , Issn 1665-8140, núm. 44, septiembre-diciembre 2015, pp. 71-100 Christian Iván Becerril Velasco impeding the state from alleviating poverty? makes poverty alleviation much less likely 73 In recent decades, there has been a general to occur because it impedes the provision consensus that within developing countries, of training and labour market policies that strong institutionalization of the labour market complement the programme and enable the has not only ameliorated the impacts of the poor to obtain a sustained income. The paper global transformation initiated in the 1970s is divided into five main sections. In the first, and 1980s but has also been more important in we review the environment that paved the way alleviating poverty than high educational levels for the structural adjustment reforms that were (Chang, 2010: 179; Grinberg, 2010: 185; Evans implemented in the 1980s and its effect on the & Sewell, 2013: 48; and others). institutional capacities and the welfare model The aim of this paper is to examine of the Mexican state. In the second section, we the extent to which the weakness of the review the way in which the ccts have evolved institutional capacities of the Mexican state has in the last three decades. In the third section, impeded the ccts from enabling the poor to we present our methodology. In the fourth obtain sustained income in the labour market section we analyse the Mexican labour market. that would allow them to move out of poverty The fifth section concludes the paper. in urban zones. We chose urban poverty for three main reasons: First, in Latin American countries in absolute terms there are more the stRuctuRal adjustment and Its poor people in the urban zones than in rural effects on the InstItutIonal caPacItIes areas, since the majority of the population of the state and the welfaRe system now lives in cities (World Bank, 2006: 149). Second, people in towns cannot depend on In the post-war period (1940s-1970s), known self-produced consumption in the way that as a period of ‘stabilizing development’, their rural counterparts can, and this is the Mexico’s economic development strategy reason why they become more dependant on relied upon state intervention to encourage the state provision of resources and services to the industrialization of the country, mainly increase their capabilities to obtain sustained of urban areas, and protecting domestic income in the labour market. Third, due to manufacturers from international competition the high levels of labour informality that exist by means of isi programmes. During this in Latin America, the main concern of state period, one of the main political actors was policy regarding employment is that poor the Partido Revolucionario Institucional (pri) people have sustained income generation, political party, which ruled Mexico from s which is the reason why the relationship with 1929 to 2000. In the course of the stabilizing o l the institutional capacities of the state regarding development period, this political party built cu their opportunities in the labour market is a corporatist and clientelist relationship with rtí a more direct in urban zones. the private sector and different social actors, y s Our results show that the weakness of the directing social protection schemes only to o y institutional capacities of the Mexican state those well-organized enough to demand them, sa n e , Issn 1665-8140, núm. 44, septiembre-diciembre 2015, pp. 71-100 The experience of the Mexican state with the conditional cash transfer programmes to alleviate poverty 74 such as state workers (the armed forces, the Ros, 2009: 157). Moreover, although the judiciary, and so on) and the formal workers country produced much of the merchandise of the private sector, excluding workers in the that was traded, the technology with which informal sector. In addition, since basic services the products were produced was imported. such as education and health are considered as In the late 1970s, Mexico was attempting to rights in the Mexican Constitution, the state replace the technology as well. However, the complemented that model with the universal industrial programmes of the state tended to provision of those services and universal “operate in combination with regressive or subsidies for rural and urban areas (Scott, only mildly progressive tax structures and low 2009: 11). tax revenues” (Teichman, 2008: 447), leaving However, not only was the universal the oil profits and international aid as the only coverage of basic services never achieved, but sources of finance, bringing about procyclical also the quality of the services provided was low. social spending and economic volatility. Notwithstanding, the isi programmes and the Most of the Latin American countries have quasi-universal welfare system implemented historically suffered from the resource curse. from the 1940s to the 1970s were, to some Mexico has been no exception; the decline of extent, successful. Mexico’s annual labour oil prices at the beginning of the 1980s joined productivity growth rate was around 2.1% and with the globalization of the economy forced gdp per capita grew annually between 3.0% and the political authorities to implement measures 4.0% in real terms (Cárdenas, 2009: 271), as a to control the macroeconomic stability of result of which it was known as the ‘Mexican the countries. After the 1982 collapse of miracle’. The social contract implemented oil prices, tied to rising inflation and high was an inclusive one since the economic and interest rates on its external debt, Mexico social models were seen as complementary, confronted its most serious economic crisis “the poverty alleviation strategy and the wider since its birth as a nation-state in 1917, with development strategy were one and the same” poverty and socio-economic inequality as the (Székely & Fuentes, 2002: 125), and the most prevalent effects, which implanted the informal and formal sectors were close to one belief that the conservative-informal welfare another, in consequence integrating most of model was exhausted. Consequently, President the actors of the social structure, and bringing López Portillo (1976-1982) declared that it about low rates of unemployment and poverty was not possible to continue paying Mexico’s (Escobar & González, 2008: 40-41). external debt, which brought about a domino Nonetheless, the social rights provided effect over the whole of Latin America, where s o were, on the one hand, just a way of keeping most of the countries found themselves in a l cu the different social groups under control similar situation with unpayable external debts rtí to keep the isi system working and on the (Sánchez, 2006: 775). a y other hand, the industrial policies could not Due to the debt crisis, Latin American s o find a sector that could compete strongly governments were no longer able to finance public y sa internationally (Moreno-Brid, Pardinas and spending through foreign borrowing because the n e , Issn 1665-8140, núm. 44, septiembre-diciembre 2015, pp. 71-100 Christian Iván Becerril Velasco region was shut off from international capital and it was reformed to enhance the openness 75 markets (Sánchez, 2006: 775). Thus, conditioned of the economy and achieve macroeconomic and encouraged by the imf, Latin American stability and fairness in income distribution.1 countries initiated a process of state reform that The main reforms were the enacting of the Fiscal would mark the end of the conservative-informal Coordination National System (fcns) Law, with state and begin the era of the ‘liberal-informal the purpose of avoiding double or triple taxation state’ (Barrientos, 2004: 156). Seeking to reduce and improving the fiscal relationships among the the huge fiscal deficit, lower inflation rates, address three levels of government, the reform of Article macroeconomic instability and adjust to the 15 of the constitution in 1983, which delegated new global order, the Mexican government cut to the municipalities the responsibilities for public spending, eliminating most of the state providing some public services, the recognition subsidies, reduced the size and scope of the state of inflation effects in the tax bases, the reduction by dismantling or privatizing state-run companies, of personal income tax in order to enhance the and opened up the economic and finance sectors. integration of corporations and individuals, The problem was, as Fukuyama pointed out, that the introduction of Value Added Tax (vat) in “in the process of reducing the scope of the state order to raise indirect tax collection, and the those reforms decreased its strength or generated introduction of a scheme of income tax levied demands for new types of state capabilities that in a global scheme for both individuals and were either weak or nonexistent” (Fukuyama, corporations, which includes all kinds of realized 2005: 20). During the industrializing period, the income, among others.2 These reforms helped state’s revenue was mainly levied on industrial the state to achieve macroeconomic stability and production, natural resources (mainly oil-related lower inflation (Alvarez, 2007: 7). However, the profits) and international trade with special tax system is still far from providing the Mexican schemes for workers in the primary sector and tax state with enough non-oil revenues to fulfil its exemptions for corporations that invested in key functions, and in relation to the gdp it is around industrial sectors and indirect taxation was based 4.5 points below the average of Latin America on a single turnover tax (Alvarez, 2007: 5). for both indirect and direct taxes and 25 points The fiscal system was part of the first below Organisation for Economic Co-operation generation reforms during the early 1980s and Development (oecd) countries.3 1 Burnell identified at least three generations of reform. First generation reforms included macroeconomic stabilization, tariff and budget cuts, privatization, and the like. The second generation reforms began in the late 1980s, introducing governance considerations such as the civil service, and the delivery of public services, s o of the institutions that create and maintain human capital, and of the environment in which private firms l u operate (competition, regulation, property rights). In the late 1990s, a third generation added social policy c tí concerns in the form of poverty reduction strategies within international development (2008: 296-297). r a 2 Some of the services that were delegated to the municipalities were: drinking water, public lighting, y s rubbish collection, public markets and public municipal safety. o y 3 See oecd tax database en http://www.oecd.org/tax. Accessed: November 2012. sa n e , Issn 1665-8140, núm. 44, septiembre-diciembre 2015, pp. 71-100 The experience of the Mexican state with the conditional cash transfer programmes to alleviate poverty 76 The main reasons for this have been has focused on trying to decentralize the pull the following. First, the influence of the of federal revenue collection without helping international and local private sector, which or encouraging states and municipalities to had greater participation in areas previously improve their institutional capacities first. reserved for state-owned enterprises, to which For instance, in 2004 state governments were the state “grants extensive tax preferential empowered to tax individual income obtained treatment, currently accounting for about from professional services, leases of fixed half of tax revenue” (Alvarez, 2009: 18). After property, disposal of property, and business the signing of the North American Free Trade activity. Nevertheless, “by 2006 only three Agreement (nafta), there has been a focus state governments – Chihuahua, Guanajuato, on fostering the growth of the manufacturing and Oaxaca – had already implemented some sector as the main strategy for generating form of local cellular tax” (Alvarez, 2007: 20). employment. Therefore, corporate income tax As a result, the Mexican state has been unable reductions and duty free vat exemptions on to mobilize enough resources towards social needs imports of machinery, equipment, parts and and the generation of employment despite the fact material have been granted in order to “set a that public expenditure has increased in recent competitive level against trading partners: usa years. Therefore, the state has had to implement and Canada” and China (Alvarez, 2007: 6-8). a residual welfare model directed only at the Second, under the fcns arrangement, the poorest, who have to be involved in participating federal government collects around 90% of in the solution to their own problems. Moreover, the total government revenue, which leaves due to its weakly institutionalized bureaucratic the state and municipal governments in apparatus, the state has been unable to find sectors uncertainty about the budget that they are in which it could have a competitive advantage going to receive the following year.4 Also, and this has impeded employment generation.5 this highly centralized scheme has favoured The bureaucratic or civil service reform, the construction of an informal scheme of on the other hand, was part of the second negotiation between the sub-national and generation reforms, which included governance federal authorities, where the political criteria considerations mainly pushed by the World affect the allocation of the resources (Cabrero Bank. This reform was considered to be one of & Zabaleta, 2011: 372). Politicians under the most important in the history of the country strong political competition direct more for scholars, researchers, politicians and society resources to those regions with high voter in general (Méndez, 2004; Merino, 2004), since turnout, or leave segments of the population it “aimed for the first time at introducing merit s o untaxed. Moreover, the federal government as the guiding principle for selecting personnel l u c rtí 4 The main formula used to allocate these resources is mainly based on the effort that local government a y put into tax collection and the number of people living in a certain region. os 5 On average, the Mexican state has invested less than 0.4% of gdp in Research and Development, whereas y a some other oecd countries such as Korea spend at least ten times more. See oecd, in http://www.oecd-ilibrary. s en org/economics/country-statistical-profile-mexico_20752288-table-mex. Accessed: 12 noviembre 2012. , Issn 1665-8140, núm. 44, septiembre-diciembre 2015, pp. 71-100 Christian Iván Becerril Velasco policies across the federal government agencies” enacting the Federal Public Service Career 77 (Dussauge, 2011: 53). The law sought to Law in 2003. establish “a mechanism for guaranteeing equal The new law only applied to around 40 opportunity of access to the public administration 000 workers at the federal level, leaving aside based on merit and with the goal of advancing the unionized officials and those who work in the development of public administration for offices where the state and the private sector the benefit of society” (Article 2, lspc - Ley del share control. Therefore, it is a limited law if Servicio Profesional de Carrera en la Administración we take into account the fact that the number Pública Federal 2003 in Spanish, my translation). of civil employees of the whole Federal Public However, the patronage and clientelist legacies Administration is more than 1 500 000, (Grindle, and issues with the design and implementation of 2010: 15). Moreover, the traditional appointing the civil service have constrained the development methods are still used; the governmental officers of an effective bureaucratic apparatus. have found gaps in the law to keep appointing The key point that allowed the implemen- positions. Dussauge found that many workers tation of the civil service was the implementa- are appointed using Article 34 of the lspc, tion of electoral democracy in the early 1990s which “was originally introduced to allow for (Panizza & Philip, 2005: 690). The public non-competitive, temporary appointments, sector reforms in Mexico were always restricted needed in case of emergencies and other to some degree by the pri political party, whose exceptional circumstances” (Dussauge, 2011: officials used the resources of the state to reward 62). In 2007, Felipe Calderón (2006-2012) party members and party activists for political brought in changes with the aim of improving support rather than to represent the interests of the effectiveness of the law. In particular, he society. When Vicente Fox took over in 2000 “provided additional requirements for using representing the right-wing political party Article 34 of the lspc-2003, in order to limit Partido Acción Nacional (pan), reform of the the number of non-competitive appointments civil service was made one of the main priorities that were apparently being made for partisan of the government. The civil service reform was reasons in most cases” (Dussauge, 2011: 67). part of the 2000-2006 Presidential Agenda of However, he opened a window to patronage and Good Government, which aimed at building clientelism by leaving every ministry in charge of institutions for markets. However, reformers the implementation of lspc without clear rules had to use “non ‘market- reform’ arguments of inspection, constraining the development of such as the consolidation of democracy and the an effective bureaucratic apparatus. reconstruction of state capabilities” (Panizza & In the local governments the situation was s Philip, 2005: 691), in order to prevent people even worse. For instance, in the case of the o l from associating the reform with the negative states by 2008, only eleven out of the 32 had cu effects of the first generation reforms, finally introduced a lspc.6 However, even in the states rtí a y s o y 6 Aguascalientes, Baja California, Chiapas, Distrito Federal, Hidalgo, Michoacán, Nuevo León, Quintana a s Roo, Veracruz, Tlaxcala and Zacatecas. en , Issn 1665-8140, núm. 44, septiembre-diciembre 2015, pp. 71-100 The experience of the Mexican state with the conditional cash transfer programmes to alleviate poverty 78 that have civil system laws, the same patron- between the formal and informal sectors since client legacies that impede the development employment shifts became more frequent and of an effective bureaucratic apparatus at the volatile (Haagh & Cook, 2005: 171-172). This, federal level do the same at the state level. along with the decline in the quality of public Moreover, despite the fact that most of the services such as education and health care due public servants hold bachelor degrees and have to the cuts in public spending, has seriously some experience, their human resource systems aggravated the situation of the middle and lack the technical and organizational expertise to lower classes, especially the poor in urban areas, put it into operation (Martínez, 2008: 213-214). since the industrialization of the stabilizing The situation of the municipalities is the worst period had transformed the country’s society of the three levels of government. Cabrero and from a rural to an urban context (around Zabaleta found that most of the municipalities 75% of the whole population) (Moreno-Brid, in Mexico, even the urban and metropolitan Pardinas and Ros, 2009: 157). ones, lack important basic rules and norms such as those that regulate basic aspects of the political structure or those of citizen participation in The Brazilian experience with the ccts the activities of the municipalities. Moreover, most of the municipalities still lack civil service The consequences of the structural reforms put systems that provide corporate coherence and pressure on Latin American leaders to find ways allow the public servants to gain experience to tackle inequality and poverty. The introduction as well. This, in consequence, brings about in the early 1990s of the ccts was one of the feeble intergovernmental relations between the main responses to these pressures, especially in different levels of government (2011: 378-391). Latin American countries, which have some of By the early 2000s, the goals of the the highest levels of inequality in the world. In the structural reforms had been accomplished, last two decades, this programme has been used having been successful in lowering inflation, as one of the main poverty alleviation strategies reducing fiscal deficits and to some extent all over the continent; Brazil has Bolsa Familia, income inequality as well. According to there is Chile Solidario in Chile, Colombia has Handelman, in Mexico economic growth its Familias en Acción programme (fa), Ecuador was also stimulated for the first time since Bono de Desarrollo Humano, Honduras the the Mexican miracle (Handelman, 1997: Programa de Asignación Familiar (praf), Jamaica 127). However, poverty rose inexorably the Programme of Advancement through Health during this period since the openness of the and Education (path), and Nicaragua the Red de s o economy profoundly changed the governance Protección Social (rps). l cu of labour markets in middle-income countries Bolsa Familia was the flagship of the Brazilian rtí where there was a relaxation of traditional Workers’ Party and was created under the a y employment protection, such as occupational command of Luiz Ignacio Lula da Silva (2003- s o welfare, job security and severance pay, 2006). The main goal of the programme was to y sa bringing about a blurring of the division break the intergenerational cycle of poverty by n e , Issn 1665-8140, núm. 44, septiembre-diciembre 2015, pp. 71-100 Christian Iván Becerril Velasco helping the poor to acquire capabilities that would Table 1.1 shows how, in Brazil, extreme 79 improve their chances of obtaining a sustained poverty has been drastically decreased in the income in the labour market.7 In Bolsa Familia, last decade, whereas in Mexico it has been Da Silva centralized the programmes of direct reduced at a slower pace. Unlike the Mexican assistance that already existed and expanded the case, the central factor that shaped the Brazilian coverage quite quickly; by 2006 it was already labour market response to the liberalization of covering 11.2 million families, becoming the the economy was the fact that the inception biggest cct programme in the world. of a democratic regime started first and this In the educational component, the objectives was followed by the opening of the economy, of the programme are, as we shall see later, very which allowed the state to take advantage of similar to those in Progresa-Oportunidades: its developmental tradition (corporatism) and to increase educational attainment to reduce the collective and social capacities of its unions poverty in the long run, to reduce poverty in the in order to adjust the institutional framework short term with a grant, to reduce child labour of the labour markets to the new conditions and to serve as a safety-net for poor families, (Haagh & Cook, 2005: 179). According to De preventing them from becoming vulnerable to Andrade et al., the main changes introduced sudden shocks in the economy. The programme were: 1. the expansion and introduction of has been successful in achieving most of its legal open-ended contracts (temporary work objectives; however, its success comes from contracts, part-time contracts, and so on); 2. the strong institutionalization of the labour the increase in the state’s revenue collection market, which has been materialized in the to tackle the growing public debt; 3. the reduction in the levels of labour informalization adjustment of institutions that allow a real and economic insecurity. According to the enforcement of open-ended contracts and the Economic Commission for Latin America and bargaining of employment conditions; 4. the the Caribbean (eclac), in Brazil since 2005, formalization of micro and small enterprises, the annual employment rates have been higher allowing access to credit and tax incentive than the unemployment rates, while in Mexico programmes, which has contributed to the since 2001, the annual employment rates have formalization of employees contracted by small been lower than the unemployment rates (2010: businesses; and 5. the increase in the minimum 122-123 and 234). wage (2010: 8-31). Table 1.1 Patterns of extreme poverty from 1980 to 2011 (%) Year 1981 1990 2000 2008 2011 s o l Mexico 13.48 18.32 15.20 11.20 …. u c Brazil 24.80 23.40 13.05 7.30 6.1 rtí a Source: eclac 2004, 2010 and 2012. y s o y 7 Bolsa Escola (Education), Bolsa Alimentacao (Nutrition), Cartao Alimentacao (Nutrition) and Auxílio Gas a s (Electric Energy) (Decree No. 5.209 of 17 september 2004). en , Issn 1665-8140, núm. 44, septiembre-diciembre 2015, pp. 71-100

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Key woRds: State, institutions, poverty, inequality, employment. Resumen York, Reino Unido. Correo-e de contacto: [email protected] . another, in consequence integrating most of . and Canada” and China (Alvarez, 2007: 6-8). Second This is a paradox because the reach of. Mexican
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