Mexican Economy

opinion Essay
1603 words
1603 words

On December 20, 1994, in an attempt to make Mexican products more competitive, Mexican President, Ernesto Zedillo Ponce de Len, devalued the Mexican Peso. Unfortunately, attempts at keeping the Peso to only a fifteen percent devaluation failed. The Peso dropped almost forty percent (Roberts, 1). It went from 3.5 to almost 7.5 peso’s to the dollar before it stabilized. The devaluation not only sent shockwaves through the Mexican economy, but through the rest of the world. Why should the world now risk it’s money to save Mexico? Why not just let the Mexican economy and government collapse?

To calm these shock waves United States President Bill Clinton, acting on his executive order, organized an approximately $49.5 billion aid package ($20B U.S., $17.5B International Monetary Fund, $10B BIS, $1B Consortium

of Latin American countries, $1B Canada) to Mexico (Department of State Dispatch, 78). This move could make globalization a friend or a foe in Mexico’s case. Friend, because it opens opportunities for foreign countries

and companies to further expand their economies and influence. Foe, because one country’s economic problems is the world’s economic headache. Unfortunately, it seems that the latter prevails.

The Mexican government is broke, citizens unhappy, rebels are itchy, and opposition leaders are gaining influence. All these are ingredients to a bad situation getting worse--without money or influence, the Mexican government is bound to be overrun.

Mexico over the past few years has gone from a totally corrupt and controlling government to a more democratic, privatized, and deregulated government. This has opened Mexico up to greater economical prosperity. Everything from government ...

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...sociated with the rewards, then one day we will be able to make a perfect globalized economy, and avoid further economic catastrophes. Now that could mean that financial catastrophies may occur on a global scale, as was the case with the Mexican Peso Crisis, but by that token it also means that financial rewards will flourish with greater magnitude.

Works Cited

“U.S. Aid Package to Mexico.” Editorial. U.S. Department of State

Dispatch. 6 Feb 1995: 78 - 79.

Charles Lane. “Who Lost Mexico.” The New Republic. 20 Feb. 1995:

16 - 18.

Tim Zimmerman. “The art of the deal.” U.S. News & World Report.

13 Feb. 1995: 57 - 61.


Week. 6 Mar 1995: America Online.


MISTAKES.” Business Week. 4 Mar 1996: America Online.

In this essay, the author

  • Analyzes how ernesto zedillo ponce de len devalued the mexican peso to make it more competitive. the devaluation sent shockwaves through mexico's economy and the rest of the world.
  • Explains that president bill clinton organized a $49.5 billion aid package to calm these shock waves.
  • Opines that globalization could be a friend or foe in mexico's case, since it opens opportunities for foreign countries.
  • Opines that one country's economic problems is the world’s economy headache. the mexican government is broke, citizens unhappy, rebels are itchy, and opposition leaders are gaining influence.
  • Explains that mexico has gone from corrupt and controlling government to democratic, privatized, and deregulated government. everything from government run factories to banks has been sold to foreign and mexican investors willing to pay high premiums for these assets.
  • Analyzes the rewards that foreign investors were about to reap from the large scale mexican privatization, with the threat of rebels in the south or the institutional revolutionary party (pri).
  • Analyzes how the socialist party took control of the government and nationalized everything in sight, costing investors billions of dollars in lost property.
  • Opines that if a socialistic government took control of mexico, every other rebel group and socialist party in latin america would now seize this opportunity and throw their own rebellions.
  • Opines that the militaries of the world would be needed to bring stabilization to latin america. this would give new meaning to foreign direct investment.
  • Explains that with globalization of products follows the globalisation of stocks, foreign debt, and currency. this was the case with mexican securities, where mexican stocks were traded on foreign exchanges and debt was financed with foreign loans.
  • Explains that the december 20th devaluation of the peso sent the bolsa (mexican stock market) plummeting.
  • Explains that the stock markets suffered, while the debt markets plummeted, especially in emerging markets such as argentina, brazil, chile, and etc. investors were wary of the situation in mexico.
  • Explains that they were demanding higher interest rates and sending the debt of these developing countries to these countries.
  • Explains that yields were reaching levels of thirty percent or more, making it almost impossible for these countries to further finance their development, almost bringing development to a standstill.
  • Explains that with the stocks and debts of countries dropping, the currencies of nations with high debt began to devalue against stronger nations. investors fearing that any further debt defaults by mexico would place the burden of repaying these loans on the united states
  • Explains that countries with debt exceeding gross domestic product (gdp), such as italy, france, and portugal, were watching their currency falter.
  • Explains that mexico's inflation and the devalued peso made imported goods unreachable by most mexican citizens.
  • Opines that repurcussions like these began to send the whole world into a recession, and the victims of these consequences were the economies of the southern states bordering mexico.
  • Explains that textile companies of south america were also seeing orders slow down. with sales slowing, interest rates rising for temporary financing, and no stabilization in sight companies faced negative growth or even bankruptcy.
  • Explains that mexican workers were being laid off to better cope with the slowdown. this further weakened foreign investors’ confidence in the mexican economy, turning the whole ordeal into a crisis.
  • Explains that the mexican peso crisis brought a huge migraine to the world, but it wasn't without its advantages. it brought opportunities to companies that could not afford to invest in mexico.
  • Explains that the crisis has also opened the opportunity for mexico to become one of the major exporting countries in the world.
  • Opines that the u.s. backed loan package was necessary to help mexico recover from a global economic breakdown.
  • Explains that by giving mexico the aid package, the world avoided an inevitable financial catastrophe by sending aid to mexico.
  • Opines that if the world is willing to take the risks associated with the rewards, one day we will be able to make a perfect globalized economy, and avoid further economic catastrophes.
  • Cites charles lane's "who lost mexico" and gary mcwilliams' "the art of the deal."
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