For much of the twentieth century, Third World economies that were based upon import-substitution industrialization (ISI) were dominated by authoritarian regimes. When economic liberalization began to overtake many of these countries, however, as happened in recent years, the question arose as to whether authoritarian rule had not become anachronistic in mediating the relations between state and economy in the Third World.

The experience of Mexico strongly suggests that authoritarian rule remains a potent force in this era of economic change. Although Mexico's authoritarian government continued to retain power even in the presence of a liberal economic agenda, adopted during the early 1990s, it did find it expedient to make some adaptations in the system. The most significant of these, by far, was to make alterations in the ruling coalition that had governed the country since the early 1930s, rather than to embark upon a transition to democracy. These changes represented the regime's most critical initiative in attempting to meet, if not reconcile, the conflicting claims of authoritarianism on the one hand with the demands of economic liberalization on the other.

The international financial community has recently joined the arms control community in scrutinizing the relationship between military spending and economic growth. The Independent Group on Financial Flows to Developing Countries, headed by Helmut Schmidt, recommended (in Facing One World) that priority in financial assistance be given to countries that spend less than 2% of their gross domestic product (GDP) on security (The Economist, 1991a: 61). Robert McNamara, past president of the World Bank as well as a former US Secretary of Defense, supported this proposal in his speech before the World Bank Annual Conference on Development Economics (April 1991), recommending that military expenditures, as a percentage of GDP, be reduced by 50%. Nicole Ball, in Pressing for Peace: Can Aid Induce Reform?, argues cogently for conditioning international assistance on the initiation, or acceleration, of reforms in defense spending in the developing world (Ball, 1992).

On 5 April 1992, Peruvian President Alberto Fujimori dissolved the Congress and suspended all constitutional guarantees, thus rendering Peru the first, among the seven leading countries of Latin America, to initiate a formal break away from the trend toward legally-elected civilian regimes which has been sweeping the region since the early 1980s. Peru's rupture of democratic rule occurred during a wave of domestic violence that evolved from, and is the consequence of, at least three major developments.

The recent passage of the North American Free Trade Agreement (NAFTA) between Canada, Mexico and the United States (US) marks an important step in the movement towards greater regionalism of trade among the countries in the Americas. From the perspective of the United States, the potential benefits to be gained from the anticipated increase in trade, economies of scale in production, increased access to the resources of production, and lower prices for the US market (due to the increased competition for consumer goods) combine to make its involvement in NAFTA desirable despite whatever limitations are posed, in the short and medium term, by Mexican underdevelopment (SerraPuche, 1992;US-ITC, 1991a).