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Just backing you and rjv up, NAFTA significantly reduced or eliminated what had at the time been sky-high tariffs on foreign goods (food, cars, tech, media, etc) coming into MX. There were definitely short-term gains for low-skill MX workers when large amounts of manufacturing was shipped down there, but offsetting this gain was the fact that a lot of Mexican manufacturers didn't have the finances (dollar-to-peso trade value worked against them) or technology to compete and subsequently crashed. This is why illegal immigration began to steadily rise in the mid-90's.
When US companies realized they could manufacture things in China for a fraction of the cost of doing it in MX, that was the nail in the coffin for a huge swath of low-skill Mexican workers, and illegal immigration ed.
The problem the US finds itself in is that the MX government has no incentive to keep their citizens in the country. They know they can offer cheap and ineffective public education to provincial (in a literal sense) Mexicans, and see huge returns when these same unskilled folks go to the US, get jobs, and start sending money to their families back home. For the MX government, it's the equivalent of free money.
So how do we stop illegal immigration? The drug war has already shown that anything can be smuggled into this country, our cons ution will never allow for the sorts of draconian measures AZ is trying to take, and our economy can only be disrupted if we stringently enforce immigration laws at the level of employment because too many businesses have grown accustomed to saving money by hiring illegals.
The only solution I see -- which will doubtlessly be unpopular -- can only take place at the federal level, and that is to give major tax incentives to businesses who a) can prove they hire US citizens exclusively, and; b) who invest in MX manufacturing. This way we can reduce demand for workers on our end, and increase demand for workers in MX. Furthermore, as a Mexican, I think steady capitol investment in MX would have the same effect as the Porfiriato did, in that it would develop Mexican infrastructure and the rule of law in a way our do-nothing government couldn't do by itself.
Going further, I think the US might even benefit from subsidizing free US-administered schools that operate within MX in order to create a higher number of highly-skilled Mexican entrepreneurs who are sympathetic to trade with the US while being intelligent enough to capitalize on Mexico's rich natural resources. The more entrepreneurs we can create down there, the sooner the oligarchic political landscape of Mexico will change.
All to say: I don't think there's a quick fix.
Jesus, I'm long-winded. Sorry.
