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Since the mid-1980s Mexico has implemented a radical reorientation of its development strategy away from state-led industrialization and trade protection. This reform has drastically reduced the role of the state in the economy in favour of market mechanisms, and changed the orientation of social policies towards targeting and decentralization. The article examines the effects of this reform on Mexico's social and economic development, and finds that its results have been far from stellar. Indeed, notwithstanding the reduction of inflation and the downsizing of the state, the economy has expanded at a slow rate way below its growth in needs. The authors conclude that if Mexico is to succeed in its quest to enter a path of robust long-term development it will need to modify its social and economic policies. Keywords: social policies; Mexican economy; economic development; social development; neoliberal reforms; NAFTA.