In the second half of the 20th century, Mexico City experienced additional rapid growth that was largely fueled by domestic migration. The metropolitan population grew from 3.1 million in 1950 to 5.5 million in 1960, and it skyrocketed to 14 million by 1980. By the early 21st century the metropolitan area had swollen to some 20 million people, with more than half of the total living beyond the Federal District’s boundaries. In effect, the national population increased 5-fold from 1940 to 2000, but the population of metropolitan Mexico City increased more than 12-fold during the same period.

In 1940 the capital accounted for nearly one-tenth of the country’s industrial firms but nearly one-third of manufacturing output. By 1950 city employers were taking advantage of an expanding workforce; thousands were arriving on buses via the newly paved Pan-American Highway, attracted by real economic opportunities along with dreams of urban success. By 1960 the capital accounted for one-fifth of the national population but nearly half of its manufacturing output.

Mexico City was a major beneficiary of the country’s policy of import-substitution industrialization (ISI), by which domestic manufacturing was encouraged and protected through taxes and tariffs on imports. However, ISI did not improve the lot for those living in the capital’s sprawling shantytowns and overcrowded tenements. Meanwhile, the government encouraged suburbanization with tax incentives for industries located in the state of México and with a ban on new housing developments in the Federal District. The ban promoted squatting in many areas; only in 1968, when the ban was lifted, did new residential neighbourhoods begin to appear on the southern end of the city.

Inspired by Mexico’s economic successes in the 1960s, the federal government wished to showcase the country’s progress to the world at large. It seemed to find the perfect opportunity to do this by hosting the 1968 Summer Olympic Games in Mexico City. However, those efforts were largely derailed following a heavy-handed attempt to silence government critics. Ten days before the Summer Games opened, security forces opened fire on student protesters in the Plaza de las Tres Culturas. As many as 300 were killed in the incident (which became known as the Tlatelolco Massacre), and the shadow it cast proved to be much longer than the counteracting goodwill of the internationally televised Games that it preceded.

During the 1980s, a time of economic crisis known as “the lost decade” in Latin America, Mexico City experienced large-scale factory closings and layoffs as well as a decline in rural-to-urban migration. Confidence in local and federal government also declined as a result of its responses to major disasters, beginning in 1984 with a series of huge explosions of liquefied petroleum gas in the northern suburb of San Juan Ixhuatepec (also called San Juanico). In 1985 a severe earthquake struck the capital, killing an estimated l0,000 people. The loose lacustrine subsoils proved particularly detrimental during the disaster as they shifted, or “liquefied,” beneath building foundations. Many of the deaths occurred as government-built apartment complexes suffered heavy damage or collapsed. Aided in part by World Bank funds, the government helped tens of thousands of families to obtain new or restored housing by 1988. A bright spot in the decade was Mexico’s hosting of the 1986 World Cup football (soccer) finals; a number of games, including the championship match, were played in Mexico City.

Foreign investment in the city increased in the 1990s as the federal government moved toward neoliberal economic policies, relaxing market controls and privatizing many formerly state-owned enterprises. At the same time, some of the capital’s heaviest industrial polluters were forced to close or move to the metropolitan fringe. First-class hotels, malls, business offices, and elite gated communities sprang up throughout the southern and western parts of the city. Tourism boomed, as did cultural imports from the United States such as fast-food restaurants and stores stocked with U.S. brands. While an affluent minority enjoyed these fruits of globalization and modernity, the poor continued to experience life much as they had in previous decades. Moreover, the region’s precarious geology reemerged as a concern as Mount Popocatépetl became active again in 1994 and erupted intermittently into the early 21st century. Although it was more of a threat to Puebla, the volcano occasionally deposited ash on the outskirts of the metropolitan area. On September 19, 2017, on the 32nd anniversary of the 1985 earthquake, Mexico City was rocked by another devastating quake. This one registered a preliminary magnitude of 7.1 on the Richter scale and claimed many dozens of lives in the capital and more than 200 lives nationally.

Many scholars in the 1970s and ’80s had feared that Mexico City itself would swell to a population of 30 million by the year 2000. However, the region’s growth rate slowed significantly in the 1980s, and by the early 21st century only two-thirds of that number lived in the entire metropolitan area. It is likely that potential immigrants were dissuaded by fears of air pollution, earthquakes, and volcanic eruptions even as Mexico City was being viewed as increasingly crime-ridden, corrupt, and overcrowded. There were also concerns that manufacturing jobs were leaving the capital for Mexico’s smaller cities, particularly those in the north, or that U.S.-based and transnational companies were moving their investments overseas to countries such as China. On the other hand, the capital’s dependence on service-related employment continued to increase.

Mexico City remains politically and economically paramount in the country, and in its achievements and struggles it often seems a microcosm for Mexico as a whole. The elections of 2000 and 2006 were especially dramatic for the city, as one-time mayors running as left-wing presidential candidates (Cuauhtémoc Cárdenas Solórzano and Andrés Manuel López Obrador, respectively) lost to their right-wing opponents in heavily contested and controversial races. On those and other occasions, streets and plazas have become political spaces contested by masses of protestors and counter-protestors as well as by heavily armed security forces. (López Obrador ran unsuccessfully for president again in 2012.) In addition, although the mayor’s office has become more conservative, the city legislature has remained leftist politically and has passed such socially progressive acts as those legalizing same-sex unions and abortion.