Economy of Mexico

Résumé du document

From the 1940's until the 1960's there was a strong economic growth in Mexico. This strong economic performance proceeded into the 60's. Manufacturing was the country's dominant growth sector and attracted many foreign investors. Although there was a growth in Mexico, there was fiscal mismanagement which also resulted in a sharp deterioration of the investment climate. During the leadership of José Lopez Portillo during the mid 70's, Mexico became a huge petroleum producer. At the end of his term of leadership Mexico had a huge external debt, because of Mexico's huge governmental borrowing due to the high amount of incomes from petroleum.Oil and petrochemicals became the economy's most dynamic growth sector. In 1973, the oil shock combined with fiscal mismanagement caused a huge disequilibrium in the balance of payment in Mexico. It even became unmanageable as capital flight intensified, forcing the government to devalue the peso by 45%. This action ended Mexico's twenty year fixed exchange rate and started the popular Mexican Sexenio crisis. Between 1978 and 1981, the government spent heavily on energy, transportation, and basic industries.

Extraits

[...] In 1999, Asian markets and Brazilian currency devaluations cause the GDP slowing down. Actually, Mexico's problem is that exports are the main source of growth in the economy. Mexico is known as a country of many economic crises, but they have always managed to come out of their crisis. It is most likely that a crisis will occur again, especially when the economic crisis hits The United States, since most of their exports go to the US. CONCLUSION Mexico has many strengths but also many weaknesses. [...]

[...] By 1982 Mexico's external debt totaled $90,000 million. Moreover, between 1983 and 1988, consumer prices augmented by approximately 4,000%, even as GDP growth averaged just When Zedillo was elected President, in December 1994, there was an enormous reduction of inflation compared to 1988 ( 113.9 as a consequence of trade liberalization and an exchange-rate band system. When we look at graph we can see 2 important periods of recession, one of them includes crisis of 1982, which could be called the debt crisis. [...]

[...] The government raised tariffs to shield domestic producers from foreign competition, further hurting the modernization and competitiveness of Mexican industry. All this turned sharply against Mexico in the early 1980s, and caused the worst recession since the 1930s. The collapse of oil prices in 1986 cut Mexico's export earnings. In 1994 Mexico joined the United States and Canada in the North American Free Trade Agreement (NAFTA), which will remove all tariffs over a 15 year period. In 1996 they became a member of the World Trade Organization (WTO). [...]

[...] After this period, GDP increases but more slowly because of the reduction in exports, which are Mexico's most important revenues. Causes of the growth and the role of the Government Mexico's growth increases through export and import substitution during the 20th Century. The successive Government pushed this growth with protection contrary to imports and fiscal encouragements. Those Governments have spent a lot of money to promote Mexico to foreign investors. During this period, enhance of petroleum prices, which are very profitable to Mexico's GDP growth: the Import Substitution Industrialization as a development strategy seem to have been successful. [...]

[...] The United States should provide support for the faltering Mexican economy, but it cannot be viewed as a blank check and it should not be seen as a pretext for opening up other issues. It is crucial that any tight conditions be discreetly applied. If they are viewed as humiliatingly punitive, it will only further erode President Zedillo's weakened political standing and threaten the necessary long-term economic and political reforms. Where will Mexico be in the year 2005? This is hardly a predictable outcome. [...]