Mexican Economy Essay

1609 Words 7 Pages
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
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With the threat of rebels in the south or the Institutional Revolutionary Party (PRI) possibly overthrowing the government, the rewards that foreign investors were about to reap from the large scale Mexican privatization
were quickly fading, hence the devaluation of the Peso in 1982. Who wants to invest in Mexican institutions if the government no longer has the power to protect them and insure their prosperity?
The socialist party managed to take control of the government and nationalized everything in sight, costing investors billions of dollars in lost property (Roberts, 3). Investors were facing the gloomy possibility of losing billions, even trillions of dollars to nationalization. Mexican stocks, debt, and currency would be rendered worthless.
If a socialistic government were to take control of Mexico, then every other rebel group and socialist party in Latin America would now seize this opportunity and throw their own rebellions--possibly erupting a situation
in Latin America where not only the moneys, but the militaries of the world would be needed to once again bring stabilization to this region of the world. This would give new meaning to the words: foreign direct investment. Instead of using money to stabilize and grow underdeveloped economies, the world would be using blood.
With the globalization of products follows the globalization of stocks, foreign debt, and currency: where one country’s…