The Peso Crisis

The Mexican Peso Crisis From the mid 1950s to the early 1970s, Mexico was a financially stable country with high harvest and relatively repress one inflation. Under these conditions the Mexican government adopted expansionary policies that created enormous fiscal deficits and gene pointd large capital inflows and an overvalued currency. The government had taken evidentiary measures to cut back governmental deficit (it had indeed saturnine to surplus in the last couple of years, trade tariffs were world lowered so as to bring Mexico into a continuous tense business purlieu and to enable NAFTA negotiations and the inflow of capital had risen as well.) The Mexican economy struggled under its crushing debt burden. Per capita gross domestic product fruit from 1981 to 1988 was -2% per year. present is a graph comparing Real GDP growth in Mexico before and after NAFTA. Carlos Salinas de Gortari was the Mexican prexy from 1988-1994 and during his disposal he pushed Mexico t o overcome the emerging markets phase and plump a essential, respected country. Salinass goal of be set about shot a developed country was looking hopeful until 1994, when Mexico joined the NAFTA agreement. Prior to this, Mexico solo had nationally produced consumer goods available. After NAFTA, Mexican businesses began to import massive amounts of goods from U.S. and Canada.

Although the Mexican government did rest the get-go of liberalization policies, it did not anticipate the enormous current direct deficit following the polity shift. The problem at this maneuver was that the Mexican peso was pegged to the sa whorse and this cause of fixed reciprocati! on rate limited investing in Mexico. By 1994, Mexico lacked the unconnected reserves to maintain a fixed exchange rate and was running out of dollars. Obviously, considering this type of exchange, the investors new that they would be gaining a certain, limited amount of coin from Mexico and when the government tried to nose over some of its debt that was coming due, investors were unwilling...If you want to get a full essay, order it on our website: OrderCustomPaper.com

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