The project was presented as a big push to alleviate the historic backwardness of Mexico’s south. The aim, though, is to offer foreign companies a secure, business-friendly environment via a preferential fiscal and customs regime. The SEZs will also offer some extra benefits like soft loans by Mexican development banks and tight security measures to guarantee the rule of law. As elsewhere, it is taken for granted that SEZs will lure multinational firms to deploy operation in these areas and so generate well-paid jobs, boost innovation and exports, and enhance Mexico´s competitiveness in international markets.

In mid-2013, Prime Minister Shinzō Abe proposed the creation of so-called national strategic special zones (NSSZs) in Japan’s largest cities. In December of that year, the Diet approved his proposal and passed the corresponding legislation. In March 2014, just months before Peña Nieto’s announcement, six of Japan’s largest urban areas, including Tokyo and Kansai, were designated as NSSZs.

Although similar zones have been established before in Japan — Structural Reform Special Zones in 2003 and Comprehensive Special Zones in 2011 — Abe’s are the closest to the basic SEZ model. NSSZs offer foreign investors a favourable institutional setting where corporate tax rates are lower and government regulations are substantially looser than elsewhere in Japan, especially regarding labour and employment. The rationale was that NSSZs will revitalise the sluggish Japanese economy and improve its competitiveness in global markets by attracting foreign capitals that will generate employment and propel innovation.

Why have these two countries on opposite sides of the Pacific undertaken such similar, equally unprecedented initiatives at this time? Why have they chosen to embrace a policy formula that has been used extensively in many countries for more than three decades?

SEZs were very effective in attracting foreign capitals and massive manufacturing operations to China, generating employment, innovation and growth in the process. Similar results have been produced in other countries. Currently, three out of four countries have at least one SEZ and some 4,300 are in operation in the world. Yet their overall record is not so bright.

The Economist recently reported that SEZs create distortions, require large investments in infrastructure and imply forgone tax revenues, so many fail. Witness the fact that ‘Africa is littered with white elephants [and] India has hundreds [of SEZs] that failed to get going’.

Likewise, a World Bank study documented that SEZs may attract foreign investments and create employment in the short term but fail to do so when the initial favourable conditions wane. The study also found that SEZs can generate exports and employment but fail to extend benefits outside their enclaves, and that foreign companies take advantage of tax breaks and other benefits without generating much employment or export revenues.

Why, then, have Peña Nieto and Abe opted for a policy option with such a questionable record?

Part of the answer is that both leaders viewed SEZs as a promising strategy to attain crucial goals of their administrations and attend to other short-term priorities. The other part is that both Peña Nieto and Abe are fully committed to push for the establishment of the Trans-Pacific Partnership (TPP) given the potentially juicy benefits this accord can open for them. Both countries have used the TPP as part of their rationale for the creation of SEZs.

In effect, Peña Nieto is betting that SEZs will help materialise the structural reforms he has pursued as his main policy undertaking to stimulate the virtually stagnant Mexican economy. Establishing SEZs is, then, a top priority for his government even though the project will require a public investment package that tops US$6.7 billion — plus forgone tax revenues — and that it is a close replica of the failed Puebla-Panamá Plan launched by Vicente Fox in 2001.

The fact is that SEZs are intended to attract foreign capital to tap into the investment opportunities the TPP and other regional arrangements, like the Pacific Alliance, can bring about. A related goal is to create the conditions for China to invest in large projects in Mexico. This comes after major projects like the Mexico City–Querétaro bullet train and the construction of a large trading hub called Dragon Mart near Cancún, in which Chinese companies were the leading partners, were scrapped in the last two years.

Similarly, Abe’s NSSZs initiative lies at the core of his economic strategy to revive the sluggish Japanese economy by implementing a set of structural reforms, the third policy arrow of his Japan Revitalisation Strategy revised in June 2014. His aim is to stimulate private investment to end deflation by breaking through the ‘bedrock’ of Japan’s tight regulatory system in its main cities. It is taken for granted that NSSZs will attract ‘investment from throughout the world’ and thus strengthen Japan’s position as an international business hub.

But, given their mixed record around the world, the question remains as to whether SEZs will be able to perform the miracles that both countries, and especially Mexico, expect.

Juan J. Palacios is a Professor at the Department of Political Studies, University of Guadalajara, Mexico and a member of the PAFTAD International Steering Committee.