The Mexican Peso Crisis: Could it have been stopped before it began?

The Mexican Peso Crisis: Could it have been stopped before it began?

During the six years of the Salinas presidency in Mexico (1988 - 1994), GDP growth averaged 3.3% per year, a number that exceeded the growth rate of the population (2%) but fell well short of growth in other poor, developing countries. Although growth was lagging behind the pace of other emerging markets, Mexican politicians were willing to sacrifice rapid economic expansion for stability. The new, apparently more stable, Mexican economy entered 1994 with aspirations of joining the ranks of the more developed and industrialized nations of the world. The NAFTA trade arrangement and the country’s acceptance into the OECD in early 1994 were looked upon as signs that Mexico had finally arrived. However, the events of 1994 would prove that Mexico and its economy still had many problems. In his last State of the Union address on November 1, 1993, President Salinas emphasized the weight that the international factor played in many of the decisions which he made. According to Salinas, “ Mexico has changed intensely. The goals of these changes were the establishment of a new relationship between the state and society, and to place Mexico in an advantageous position in the new international reality.” The opening of the Mexican economy, or the apertura, had a profound effect on the daily lives of Mexicans. Prior to the relaxation of trade restrictions, only nationally produced consumer goods were available. In addition, import protection led to oligopoly prices for goods, which were in many cases second rate in nature. After the dismantling of ISI, a wide variety of products from around the world could be bought in stores at prices indicative of competition at the exi...

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