DOCSLIB.ORG

Annual Report 2001

Total Page：16

File Type：pdf, Size：1020Kb

Download full-text PDF Read full-text
Annual Report 2001 Annual Report 2001 APRIL 2002 BOARD OF GOVERNORS Governor GUILLERMO ORTIZ MARTÍNEZ Deputy Governors EVERARDO ELIZONDO ALMAGUER GUILLERMO GÜÉMEZ GARCÍA JESÚS MARCOS YACAMÁN JOSÉ JULIÁN SIDAOUI DIB Secretary FRANCISCO JOAQUÍN MORENO Y GUTIÉRREZ OFFICERS General Directors ARMANDO BAQUEIRO CÁRDENAS (Economic Research) ALEJANDRO GARAY ESPINOSA (Internal Administration) DAVID AARÓN MARGOLÍN SCHABES (Central Banking Operations) FRANCISCO JOAQUÍN MORENO Y GUTIÉRREZ (Legal) ANGEL ANTONIO PALOMINO HASBACH (Development Financial Intermediaries) JOSÉ GERARDO QUIJANO LEÓN (Analysis of the Financial System) Comptroller JORGE ESPINOSA DE LOS MONTEROS GUERRA Directors JOAQUÍN ARAICO RÍO (Administration) SAMUEL ALFARO DESENTIS (Market Analysis and Evaluation) FRANCISCO JAVIER CÁRDENAS RIOSECO (Development Financial Intermediaries) CARLOS CASTAÑEDA GASCA (Security) FERNANDO ALFREDO CASTAÑEDA RAMOS (Information Systems) JESÚS CERVANTES GONZÁLEZ (Economic Measurement) FERNANDO LUIS CORVERA CARAZA (Central Banking Policy) ALEJANDRO DÍAZ DE LEÓN CARRILLO (Macroeconomic Analysis) FRANCISCO JAVIER DUCLAUD GONZÁLEZ DE CASTILLA (Operations) MANUEL GALÁN MEDINA (Operative and Payment Systems) ALEJANDRO GARCÍA KOBEH (Information Coordination) JAVIER EDUARDO GUZMÁN CALAFELL (International Affairs) MARGARITA MOLERÉS BARONA (Operation Registry) JOSÉ CUAUHTÉMOC MONTES CAMPOS (Information of the Financial System) PASCUAL RAMÓN O´DOGHERTY MADRAZO (Analysis of the Financial System) JAIME PACREU VIZCAYA (Bank Note Issuance) FEDERICO RUBLI KAISER (External Relations) HUMBERTO ENRIQUE RUIZ TORRES (Legal) JAVIER SALAS MARTÍN DEL CAMPO (Prices, Wages and Productivity) GABRIEL ALBERTO VERA Y FERRER (Systematization of Economic Information and Information Services) ALEJANDRO MARIANO WERNER WAINFELD (Economic Studies) GERARDO RUBÉN ZÚÑIGA VILLARCE (Accounting) The Annual Report Submitted to the President and the Mexican Congress in accordance with Banco de México's Law Article 51, section III. FOREWARNING Figures presented for 2001 are preliminary and subject to change. Although data is consistent within each section, comparing figures drawn from various sections may result in discrepancies because they have been estimated on the basis of different sources and methodologies Banco de México has always given the utmost importance to the publication of information that will help decision-making and allow the public to evaluate the execution of its policies. This text is provided only as a convenience to the reader, and discrepancies could eventually arise from the translation of the original document into English. The original and unabridged Annual Report in Spanish is the only official document. Table of Contents I. Introduction 1 II. International Environment 3 III. Evolution of the Economy: General Overview 9 III.1. Economic Activity 9 III.2. Employment, Wages and Productivity 22 III.3. External Sector 37 III.4. Public Finances 51 III.5. Evolution of Monetary and Credit Aggregates, and of the Securities Market 57 III.6. Inflation 78 IV. Monetary and Exchange Rate Policy 97 IV.1. Monetary Policy 97 IV.2. Exchange Rate Policy 105 V. Final Remarks 109 Appendix 1 115 Appendix 2 121 Statistical Appendix 126 Statistical Appendix 128 Index 128 Basic Information 133 Production and Employment 139 Prices, Wages and Productivity 149 Monetary and Financial Indicators 165 Public Finances 181 External Sector 195 Banco de México´s Balance Sheet 211 A NNUAL R EPORT 2001 I. Introduction Throughout 2001 Mexico experienced the effects of the global economic slowdown, especially that of the United States. Exports, output and employment all contracted while GDP fell 0.3 percent. The weakness of economic activity translated into a considerable reduction of formal employment particularly in those sectors that are closely linked to exports, and the number of workers affiliated to the Mexican Social Security Institute (Instituto Mexicano del Seguro Social, IMSS) fell by 358 thousand individuals. However, it is important to emphasize that unlike previous recession periods in Mexico, inflation declined markedly in a stable financial environment in 2001. Annual inflation moved from 8.96 percent to 4.40 percent between December 2000 and the same month in 2001, therefore attaining the established target for the third consecutive year. Meanwhile, both nominal and real interest rates fell to levels unseen for many years and the exchange rate showed remarkable stability. Thus, the economy, for the first time in a quarter of a century, experienced a normal business cycle in which economic downturn was accompanied by stable behavior of the country’s main financial variables. Several elements of strength allowed the Mexican economy to undergo an orderly adjustment to the downward phase of the economic cycle: i) monetary policy compatible with the inflation objective; ii) fiscal discipline; and iii) the structural reforms launched in previous years (most importantly, trade liberalization). This combination of factors led to more long-term external capital inflows and also helped to curb the current account deficit. All of the aforementioned leads to believe that Mexico’s economy will recover in line with the rest of the world. During 2001, developments in inflation responded to the following factors: the preventive monetary policy undertaken in 2000 and at the start of 2001; the decline in aggregate demand; exchange rate stability; and, finally, the favorable evolution of prices of agricultural and livestock goods and of those of goods and services administered or regulated by the public sector. It is important to mention that there was also a substantial decline in core inflation, from 7.52 percent at year-end 2000 to 5.08 percent at the 1 B ANCO DE M ÉXICO close of 2001. The decline of overall inflation could be transitory as it benefited from the reduction –perhaps also transitory– of some highly volatile prices. As a result, core inflation has now gained relevance in the evaluation of medium-term inflationary pressures. In response to Mexico’s economic changes, monetary policy has moved towards an inflation-targeting scheme. In order to attain the established targets, monetary policy actions in Mexico over recent years have been founded on an exhaustive and continuous analysis of short and medium-term inflationary pressures. When this assessment has indicated that medium-term inflation is not compatible with the targets, the monetary policy stance has been altered to induce the necessary monetary conditions to bring inflation forecasts in line with the objectives. One aspect of the present monetary policy framework worth mentioning is its emphasis on transparency and communication regarding the central bank’s motives and actions. These factors, besides being a fundamental part of the process of accountability that an autonomous entity like Banco de México must comply, also contribute to alleviate the social cost of abating inflation. 2 A NNUAL R EPORT 2001 II. International Environment During 2001 there was a synchronized slowdown of the economies of the United States, Japan and Europe that caused an unusually severe contraction of international trade flows (Graph 1 and Table 1). The deterioration of global economic growth throughout the year had a considerable impact on the Mexican economy’s performance as it led to reduced levels of exports, economic activity and employment. The substantial decline in exports contrasted with the relatively favorable conditions surrounding the supply of foreign capital that continued despite the fear of contagion from instability in some emerging markets. Mexico smoothly adjusted to the changing international scenario, thereby laying the foundations for sustained growth once the world economy begins to pick up. Graph 1 Industrial Output* in the United States, Japan and the European Union Annual percentage change 10 5 0 -5 United States -10 Japan Euro zone -15 JMMJSNJMMJSNJMMJSNJMMJSN 1998 1999 2000 2001 * Excluding Construction. Source: Bureau of Economic Analysis, Eurostat, and Ministry of Economy, Trade and Industry of Japan. 3 B ANCO DE M ÉXICO Table 1 GDP and World Trade Annual percentage change 1997 1998 1999 2000 2001 e/ World GDP 4.2 2.8 3.6 4.7 2.4 Advanced Economies 3.4 2.7 3.3 3.9 1.1 Main Advanced Economies 3.2 2.8 3.0 3.5 1.0 United States 4.4 4.3 4.1 4.1 1.2 European Union 2.3 2.9 2.6 3.3 1.5 Japan 1.8 -1.0 0.7 2.2 -0.4 Asian RIE 2/ 5.8 -2.4 7.9 8.2 0.4 Developing Countries 5.8 3.6 3.9 5.8 4.0 Africa 3.1 3.5 2.5 2.8 3.5 Asia 6.5 4.0 6.2 6.8 5.6 Middle East and Turkey 5.1 4.1 1.1 5.9 1.8 Latin America and the Caribbean 5.3 2.3 0.1 4.1 1.0 Transition Economies 1.6 -0.8 3.6 6.3 4.9 World Trade in Goods 10.5 4.6 5.6 12.8 0.2 e/ Estimated. 1/ Including United States, Japan, Germany, France, Italy, United Kingdom and Canada. 2/ Including China, Hong-Kong, Korea, Singapore and Taiwan. Source: World Economic Outlook, December 18th 2001, IMF except for the United States: Bureau of Economic Analysis; European Union: Eurostat and; Japan: Cabinet Office. The downturn in the United States’ economy began in the second half of 2000 as a result of cuts in private investment plans, particularly in the technology sectors. The United States’ economy became weaker in 2001 and brought an end to that country’s longest period of postwar economic expansion. Thus, during 2001 GDP in that country registered its lowest growth in a decade. The manufacturing sector was hardest hit by the drop in domestic demand and by the contraction of exports. The impact of reduced investment and a considerable adjustment in inventories was partly offset by relatively strong expenditure by households, the easement of monetary policy and the granting of fiscal incentives. The uncertainty and disruption caused by the terrorist attacks on September 11th had an adverse impact on the operations of the world’s most important financial centers. In response to intensified risks in an economy that was already fragile, the United States authorities agreed to further ease monetary policy and made plans for additional fiscal incentives.
Load more

Recommended publications
  • The Fall of the Dominant Presidency: Lawmaking Under Divided Government in Mexico
    NÚMERO 185 BENITO NACIF The Fall of the Dominant Presidency: Lawmaking Under Divided Government in Mexico MAYO 2006 www.cide.edu Las colecciones de Documentos de Trabajo del CIDE representan un medio para difundir los avances de la labor de investigación, y para permitir que los autores reciban comentarios antes de su publicación definitiva. Se agradecerá que los comentarios se hagan llegar directamente al (los) autor(es). • D.R. ® 2006. Centro de Investigación y Docencia Económicas, carretera México-Toluca 3655 (km. 16.5), Lomas de Santa Fe, 01210, México, D.F. Tel. 5727•9800 exts. 2202, 2203, 2417 Fax: 5727•9885 y 5292•1304. Correo electrónico: [email protected] www.cide.edu Producción a cargo del (los) autor(es), por lo que tanto el contenido así como el estilo y la redacción son su responsabilidad. Abstract Transition from authoritarianism to democracy involved the dismantling of the hegemonic party system. Through a long and complex process that gained momentum after the 1988 presidential elections, the political hegemony of a single party gave way to a competitive three-party system. This development changed the balance of power within Congress and the role of the executive branch in the policy-making process, even before the old hegemonic party lost the presidency of the Republic in 2000. Given the mixed-member system through which the Chamber of Deputies and the Senate are elected, divided government is likely to be the regular mode of operation of the Mexican democracy in the future. What has been the effect of divided government on the balance of power? The argument advanced in this article is that democratization undermined the conditions that made centralization of power in the presidency possible.
    [Show full text]
  • Fobaproa: El Costo Del Rescate Bancario Vol II.Indb
    Grupo Parlamentario del PRD en la LX Legislatura de la Cámara de Diputados del Congreso de la Unión Av. Congreso de la Unión, núm. 66 Col. El Parque 15960 México, D.F. Fobaproa: el costo del rescate bancario, volumen II Juan Moreno Pérez México, julio de 2009 Cuidado de la edición y corrección Renata Soto-Elízaga Diseño María de Lourdes Álvarez López Formación de texto Nicolás Severino Rámila Formación de cuadros María de Lourdes Álvarez López Asistencia editorial Susana Gutiérrez Soto Susana Nolasco Arano El texto de este libro está disponible en formato PDF y puede obtenerse en: <http://prd.diputados.gob.mx/publicaciones/p_03.htm>. Se autoriza plenamente (y se agradece) su reproducción, siempre y cuando se cite la fuente. GRUPO PARLAMENTARIO DEL PRD CÁMARA DE DIPUTADOS / CONGRESO DE LA UNIÓN LX LEGISLATURA Mesa Directiva Javier González Garza Coordinador Francisco Javier Calzada Vázquez VicecoordinadorVicecoordinador Ruth Zavaleta Salgado Vicepresidenta de la Mesa Directiva de la Cámara de Diputados Mario Vallejo Estévez PresidentePresidente de Debates del Pleno Sonia Nohelia Ibarra Fránquez Administración Interna Juan N. Guerra Ochoa Proceso Legislativo Roberto Mendoza Flores Medio Ambiente y Recursos Naturales Holly Matus Toledo Equidad Social Juan Manuel San Martín Hernández DesarrolloDesarrollo MetropolitanoMetropolitano Salvador Ruiz Sánchez Reforma del Estado Jesús Humberto Zazueta Aguilar Política Internacional Daniel Dehesa Mora Política Social Miguel Ángel Solares Chávez Cultura, Educación, Ciencia y TecnologíaTecnología Alliet
    [Show full text]
  • These Are the Good Old Days: Foreign Entry and the Mexican Banking System
    NBER WORKING PAPER SERIES THESE ARE THE GOOD OLD DAYS: FOREIGN ENTRY AND THE MEXICAN BANKING SYSTEM Stephen H. Haber Aldo Musacchio Working Paper 18713 http://www.nber.org/papers/w18713 NATIONAL BUREAU OF ECONOMIC RESEARCH 1050 Massachusetts Avenue Cambridge, MA 02138 January 2013 Research for this project was supported by the Hoover Institution’s Task Force on Property Rights. Research assistance was ably provided by Karma Galay, Andrew Hall, Andre Martinez Fritscher, and Glen Weyl. Charlie Calomiris, Latika Chaudhary, Robert Cull, Arturo J. Galindo, José Luis González Anaya, Noel Maurer, Victor Menaldo, Armando Razo, Liliana Rojas Suarez and the Economia Panel (LACEA) made helpful suggestions to an earlier draft of this work. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research. NBER working papers are circulated for discussion and comment purposes. They have not been peer- reviewed or been subject to the review by the NBER Board of Directors that accompanies official NBER publications. © 2013 by Stephen H. Haber and Aldo Musacchio. All rights reserved. Short sections of text, not to exceed two paragraphs, may be quoted without explicit permission provided that full credit, including © notice, is given to the source. These Are the Good Old Days: Foreign Entry and the Mexican Banking System Stephen H. Haber and Aldo Musacchio NBER Working Paper No. 18713 January 2013 JEL No. G18,G21,N26,N46 ABSTRACT In 1997, the Mexican government reversed long-standing policies and allowed foreign banks to purchase Mexico’s largest commercial banks and relaxed restrictions on the founding of new, foreign-owned banks.
    [Show full text]
  • The Banking Sector Rescue in Mexico
    The Banking Sector Rescue in Mexico ELIZABETH MCQUERRY The author is a senior economic analyst in the Latin America Research Group of the Atlanta Fed’s research department. She thanks Leslie Elliott Armijo, David Gould, Frank King, Mary Rosenbaum, and members of the Latin America Research Group for their helpful comments and suggestions. HE DEVALUATION OF THE MEXICAN PESO IN DECEMBER 1994 PROVOKED A PROFOUND ECO- NOMIC DOWNTURN AND REVEALED A FRAGILE BANKING SECTOR. ALTHOUGH MEXICO HAD ALREADY LIBERALIZED MANY PARTS OF THE ECONOMY AND PRIVATIZED STATE-RUN BANKS, T MANY BANKS STILL HAD LAX MANAGEMENT, AND ALL BANKS OPERATED WITHIN A WEAK ACCOUNTING AND SUPERVISORY ENVIRONMENT. FEARFUL THAT THE FINANCIAL SYSTEM WOULD COLLAPSE UNDER A RISING LEVEL OF PAST DUE LOANS, THE MEXICAN GOVERNMENT MOUNTED A RESCUE OF THE BANKING SECTOR THAT INCLUDED INTERVENING IN THE DAILY OPERATIONS OF SOME PROBLEM BANKS WHILE ESTABLISHING A SERIES OF CAPITALIZATION AND RESTRUCTURING PROGRAMS AVAILABLE TO ALL BANKS. The banking sector’s problems were not quickly This article examines Mexico’s bank rescue efforts surmountable. Immediate government intervention (1995–98) with a particular focus on the role of the helped shore up the system and began improving bank deposit insurance fund, the Bank Fund for the balance sheets, but past due loans remained at high lev- Protection of Savings (FOBAPROA) and shows how the els and credit provision remained low. The continued rescue was successful in stabilizing the banking sector poor performance of some banks compelled authorities but failed to revitalize it as the nation’s financial inter- to expand their systemic restructuring efforts through mediary.
    [Show full text]
  • GGD-96-56 Mexico's Financial Crisis
    United States General Accounting Office Report to the Chairman, Committee on GAO Banking and Financial Services House of Representatives February 1996 MEXICO’S FINANCIAL CRISIS Origins, Awareness, Assistance, and Initial Efforts to Recover GAO/GGD-96-56 United States General Accounting Office GAO Washington, D.C. 20548 General Government Division B-261008 February 23, 1996 The Honorable James A. Leach Chairman, Committee on Banking and Financial Services House of Representatives Dear Mr. Chairman: This report responds to your request concerning Mexico’s financial crisis. The report examines the origins of Mexico’s financial crisis; assesses the extent to which the U.S. government and the International Monetary Fund (IMF) were aware of Mexico’s financial problems throughout 1994 and provided advice to Mexico; describes the U.S. and international response to the crisis, including an assessment of the terms and conditions of the agreements implementing the U.S. portion of the assistance; provides an analysis of the statutory authority for the Secretary of the Treasury’s use of the Exchange Stabilization Fund (ESF) to fund the assistance package; and examines the initial efforts of Mexico to recover from the crisis, including Mexico’s access to international capital markets. We are sending copies of this report to interested Members of Congress, appropriate committees, executive branch agencies, and Mexican financial officials. Copies will also be made available to others upon request. If you have any questions concerning this report, please call JayEtta Hecker, Associate Director of International Relations and Trade Issues, at (202) 512-8984. Other major contributors to this report are listed in appendix IV.
    [Show full text]
  • Unmasked: López Obrador & the End of Make-Believe
    ACKNOWLEDGMENTS This volume began to take shape in my mind when Andrés Manuel López Obrador effectively assumed control of Mexico’s government on July 1, 2018, the eve of his triumph in the presidential elections. His mandate was absolute and unequivocal, and the problems that he intends to attack are the central problems of Mexico. My differences with him are not his intended objectives, particularly his desire to address any number of Mexico’s ancestral evils such as inequality, poverty, and lack of growth—the nodal issues of the country—but rather his intended means of addressing them, as well as his propensity to evade political reality and the realities of globalization. It has been clear from the start that he does not recognize that there are limits to his capacity to act and modify the national reality. That reality must change so that Mexico can break with a past that has not improved the population’s well-being—however, such change does not necessarily entail completely wiping away everything that exists, as the new president claims. If he continues on his chosen path—one guided by obsessions, incidents, and agendas that are incompatible with the vision that he has expressed repeatedly in his speeches and books—López Obrador will end up against the wall, as so many of his predecessors have ended. As long as Mexico remains integrated with international commercial and financial circuits, there is no way to avoid the tangible and inevitable realities of the way financial markets work or the investment decisions made by both domestic and foreign entrepreneurs and investors.
    [Show full text]
  • Annual Report 1999
    Annual Report 1999 APRIL 2000 BOARD OF GOVERNORS Governor GUILLERMO ORTIZ MARTÍNEZ Deputy Governors EVERARDO ELIZONDO ALMAGUER GUILLERMO GÜEMEZ GARCÍA JESÚS MARCOS YACAMÁN JOSÉ JULIÁN SIDAOUI DIB Secretary HÉCTOR REYNALDO TINOCO JARAMILLO OFFICERS General Directors JAVIER ARRIGUNAGA GÓMEZ DEL CAMPO (Legal) ARMANDO BAQUEIRO CÁRDENAS (Economic Research) JORGE ESPINOSA DE LOS MONTEROS GUERRA (Internal Administration) ALONSO GARCÍA TAMÉS (Central Banking Operations) ANGEL ANTONIO PALOMINO HASBACH (Development Financial Intermediaries) JOSÉ GERARDO QUIJANO LEÓN (Analysis of the Financial System) Directors GILBERTO CALVILLO VIVES (Information Systems) FRANCISCO JAVIER CÁRDENAS RIOSECO (Development Financial Intermediaries) CARLOS CASTAÑEDA GASCA (Administration) JESÚS ALEJANDRO CERVANTES GONZÁLEZ (Economic Measurement) MANUEL GALÁN MEDINA (Market Analysis and Evaluation) ALEJANDRO GARAY ESPINOSA (Comptroller) JAVIER EDUARDO GUZMÁN CALAFELL (External Relations) DAVID MARGOLÍN SCHABES (Operations) MARGARITA MOLERÉS BARONA (Operational Registry) JOSÉ CUAUHTÉMOC MONTES CAMPOS (Information of the Financial System) FRANCISCO JOAQUÍN MORENO Y GUTIÉRREZ (Legal) PASCUAL RAMÓN O´DOGHERTY MADRAZO (Analysis of the Financial System) JAIME PACREU VIZCAYA (Bank Note Issuance) JAVIER SALAS MARTÍN DEL CAMPO (Prices, Wages and Productivity) MOISÉS SCHWARTZ ROSENTHAL (Macroeconomic Analysis) HECTOR REYNALDO TINOCO JARAMILLO (Central Bank Regulations) FRANCISCO VARA MORA (Security) GABRIEL ALBERTO VERA Y FERRER (Systematization of Economic Information and Services) GERARDO RUBÉN ZUÑIGA VILLARCE (Accounting) ALEJANDRO MARIANO WERNER WAINFELD (Economic Studies) As of this year, the translation of Banco de México's "Annual Report" replaces the publication of "The Mexican Economy". The Spanish version of this Annual Report was Submitted to the President and the Congress of Mexico, in accordance with Banco de México’s Law, Article 51, section III. FOREWARNING The figures presented for 1999 are preliminary, and are subject to change.
    [Show full text]
  • Mexico's Experiments with Bank Privatization And
    Journal of Banking & Finance 29 (2005) 2325–2353 www.elsevier.com/locate/jbf MexicoÕs experiments with bank privatization and liberalization, 1991–2003 Stephen Haber * Stanford University, Bldg. 200, Room 19, Stanford, CA 93906-2024, United States Available online 31 March 2005 Abstract During the 1990s Mexico conducted two experiments with its banking system. In the first experiment (1991–96) it privatized the banks. This experiment took place with weak institutions to enforce contract rights. It also took place without institutions that encourage prudent behav- ior by bankers. The result was reckless behavior by banks, and a collapse of the banking system. In the second experiment (1997–2003), Mexico reformed many of the institutions that pro- moted bank monitoring and it opened up the industry to foreign investment. It was less success- ful, however, in reforming the institutions that promote the enforcement of contract rights. The result was that bankers behaved prudently, but prudent behavior in the context of weak con- tract rights implies that banks are reluctant to extend credit to firms and households. Ó 2005 Elsevier B.V. All rights reserved. JEL classification: D23; F23; G21; G28; G38 Keywords: Privatization; Banking; Mexico; Foreign entry 1. Introduction Over the past decade Mexico has conducted two experiments with its banking sys- tem. The first took place in 1991 when the government privatized the commercial * Tel.: +1 650 723 1466; fax: +1 650 723 1500. E-mail address: [email protected] 0378-4266/$ - see front matter Ó 2005 Elsevier B.V. All rights reserved. doi:10.1016/j.jbankfin.2005.03.017 2326 S.
    [Show full text]
  • The Case of Mexico
    WORKING PAPER The Case of Mexico Felipe Meza JANUARY 2019 A Program of 1126 E. 59th St, Chicago, IL 60637 Main: 773.702.5599 bfi.uchicago.edu The Monetary and Fiscal History of Mexico, 1960–2017* Felipe Meza Centro de Análisis e Investigación Económica and Instituto Tecnológico Autónomo de México Abstract In this chapter, I employ a model of the consolidated government budget constraint to study the monetary and fiscal history of Mexico. I study the period 1960–2017, dividing it into three subperiods: rapid growth and monetary expansion, 1960–1982; crisis and reform, 1982–1995; and slow growth and macroeconomic stability, 1995–2017. The crisis and reform period includes the major economic crises of 1982 and 1994. I argue that a simple version of the model explains the 1982 debt crisis. A richer version is needed to explain the more complex 1994 crisis. A constitutional change that made the Banco de México independent of the federal government in 1993 was the first step in a transition from fiscal dominance to monetary dominance. Inflation fell persistently after 1995, reaching values of 3 percent per year in 2016, which was the inflation target of the Banco de México. On the fiscal side, I observe that the total debt-to-GDP ratio increased from 1960 to 1988 and fell from 1988 to 2009. Between 2009 and 2016, the total debt-to-GDP ratio grew persistently. ______________________________________________ *I thank seminar participants at the 2016 and 2018 BFI Conferences on the Monetary and Fiscal History of Latin America, the Banco de México, and the International Economic Association World Congress 2017, in particular, Rodolfo Manuelli and Enrique Mendoza, for their valuable comments.
    [Show full text]
  • The Mexican Peso Crisis: Implications for the Regulation of Financial Markets
    Law and Business Review of the Americas Volume 2 Number 4 Article 11 1996 The Mexican Peso Crisis: Implications for the Regulation of Financial Markets Douglas W. Arner Follow this and additional works at: https://scholar.smu.edu/lbra Part of the Comparative and Foreign Law Commons Recommended Citation Douglas W. Arner, The Mexican Peso Crisis: Implications for the Regulation of Financial Markets, 2 LAW & BUS. REV. AM. 28 (1996) https://scholar.smu.edu/lbra/vol2/iss4/11 This Article is brought to you for free and open access by the Law Journals at SMU Scholar. It has been accepted for inclusion in Law and Business Review of the Americas by an authorized administrator of SMU Scholar. For more information, please visit http://digitalrepository.smu.edu. 28 NAFTA. law and Business Review of the Americas The Mexican Peso Crisis: Implications for the Regulation of Financial Markets Douglas W Amer I. The Quest for Capital and the Development of International Capital Markets II. The Mexican Peso Crisis of 1994-1995 A. THE ORIGINS OF THE MEXICAN Ciusis B. THE INTERNATIONAL SITUATION: THE TEQUILA EFFECr C. RESPONSES TO THE MEXICAN PESO CRISIS 1. InternationalAssistance 2. Domestic Responses D. EVALUATION OF EFFECTIVENESS III. Capital Surges and Domestic Market Regulation A. OVERVIEW OF THE REGULATION OF THE MEXICAN FINANCIAL SYsrEM B. IMPACT OF CAPITAL FLOWS ON THE MEXICAN FINANCIAL SYsTEM C. DOMESTIC REGULATORY MEASURES IN RESPONSE TO THE IMPACT OF THE CRISIS IV. The International Response to the Threat of Future Capital Surges A. THE IMF RESPONSE: LIQUIDITY AND DISCLOSURE B. THE GROUP OF TEN AND THE RESOLUTON OF SOVEREIGN LIQUIDITY CRISES 1.
    [Show full text]
  • MEXICO Transforming
    PACIFIC COUNCIL ON INTERNATIONAL POLICY T HE WESTERN PARTNER OF THE C OUNCIL ON F OREIGN R ELATIONS MEXICO Transforming MISSION STATEMENT: The Pacific Council on International Policy aims to promote better understanding and more effective action, by private and public sector leaders alike, in addressing a rapidly changing world. It brings together leaders from diverse communities across the Western United States and around the Pacific Rim. Its focus is the interaction of global trends and local effects as national borders become more porous, traditional concepts of “public” and “private” blur and what constitutes “policy” itself is changing. Cover Photo by: Graciela Iturbide Pacific Council on International Policy Los Angeles, CA 90089-0035 Tel: (213) 740-4296 Fax: (213) 740-9498/9993 E-Mail: [email protected] CONTENTS SUMMARY 1 PREFACE 4 STUDY GROUP MEMBERS 6 IMPORTANT BUT UNCERTAIN TRANSITIONS 8 THE ECONOMIC TRANSFORMATION 9 THE NAFTA EFFECT 12 UNEVEN STRUCTURAL REFORM 13 THE BANKING SECTOR 14 TO DOLLARIZE OR NOT 16 ECONOMIC POLICY OPTIONS 17 A COUNTRY DIVIDED 18 THE CHIAPAS QUAGMIRE 19 NEW ACTORS, NEW ROLES 21 THE UNFINISHED POLITICAL TRANSITION 27 BUILDING THE RULE OF LAW 30 THE DRIVERS OF MEXICO’S FUTURE 33 MEXICO’S FUTURE: IMPLICATIONS FOR THE UNITED STATES 37 PERSONAL COMMENTS 41 ACKNOWLEDGEMENTS 42 Cover Photo by: Graciela Iturbide SUMMARY he Mexicos in the minds of many Americans do not exist. Those who think of Mexico as Tunremittingly poor, rural, traditional and authoritarian have not kept up with the vast changes reshaping the country. Yet those who conceive of Mexico as already transformed into a modern, open, prosperous, stable and democratic nation overlook the immense problems the country is still very far from having resolved.
    [Show full text]
  • The Emergence and Entrenchment of a New Political Regime in Mexico by Octavio Rodríguez Araujo Translated by Lorna Scott Fox
    The Emergence and Entrenchment of a New Political Regime in Mexico by Octavio Rodríguez Araujo Translated by Lorna Scott Fox Mexico in the eighties was torn between two political systems: one statist, populist, and authoritarian and the other neoliberal, technocratic, and no less authoritarian. Large and powerful business groups, both Mexican and foreign, that had adopted neoliberal dogma managed to impose the latter through the fraudulent election of Carlos Salinas de Gortari as President of the Republic in 1988. The technocracy, first under the Partido Revolucionario Institucional (Institutional Revolutionary Party— PRI) and then under the Partido Acción Nacional (National Action Party—PAN), became entrenched in power and did not hesitate to conduct a preemptive coup to prevent Andrés Manuel López Obrador of the Partido de la Revolución Democrática (Democratic Revolution Party—PRD) from winning the presidency in 2006. The reason is not hard to understand: López Obrador represented something that the rul- ing class was unable and unwilling to concede: the need to dismantle the new regime and return to greater state intervention and the safeguarding of national sovereignty, especially with regard to natural resources. The dilemma of two overlapping political regimes was resolved, by trickery and fraud, in favor of neoliberal technocracy in 2000, with the victory of the right-wing PAN. The problem is that the center-left party, with Cuauhtémoc Cárdenas and López Obrador, does not seem up to the historic challenge that it confronts. Keywords:
    [Show full text]