A revised version appears as: "Mexican Meltdown: States, Markets, and post-NAFTA Financial Turmoil" (with Maxwell Cameron). Third World Quarterly, Vol. 17, No. 5, 1996 MEXICAN MELTDOWN: STATES, MARKETS AND POST-NAFTA FINANCIAL TURMOIL Maxwell A. Cameron Associate Professor Norman Paterson School of International Affairs Carleton University, Ottawa, Ontario K1S 5B6 CANADA Tel: (613) 520-6655 Fax: (613) 520-2889 and Visiting Fellow Helen Kellogg Institute for International Studies 216 Hesburgh Center University of Notre Dame, Indiana 46556 USA Tel: (219) 631-6982 Fax: (219) 631-6717 E-Mail:
[email protected] Vinod K. Aggarwal Professor University of California, Berkeley Berkeley, California, 94720 USA Tel: (510) 642-2817 Fax: (510) 642-9515 E-Mail:
[email protected] September 1996 ABSTRACT The devaluation of the Mexican peso in December 1994 triggered a financial panic that required massive intervention by the United States government and the International Monetary Fund in an effort to prevent a full-scale financial collapse. This article examines the impact, causes, and policy implications of the peso crisis, as well as the reasons for the U.S.-led bailout package. It then considers the crisis in the light of three classical schools of international political economy: liberalism, mercantilism, and structuralism. The conclusions call attention to the potentially destabilising effects of deregulated financial markets, especially for countries that are heavily reliant on foreign savings, and suggests that existing institutions at the international level are inadequate for managing the problem. ABOUT THE AUTHORS Maxwell A. Cameron is Associate Professor at the Norman Paterson School of International Affairs at Carleton University and a Visiting Fellow at the Helen Kellogg Institute for International Studies at the University of Notre Dame.