Mexico Financial Crisis

Because of the oil boom, foreign investment continued to pour into Mexico, but the economy was beginning to teeter on the brink of collapse. The peso was devalued three more times between 1976 and 1982. Current accounts drew even further out of balance, and overall foreign debt rose enormously during this six-year period,

Asymmetric Outcomes: Nayyar (2006) suggests that globalisation has resulted in the exclusion and inequality of countries in terms of the levels of international trade, investment and finance. Not all countries have benefited from the process and there has been a widening gap between the rich and poor for instance countries in Sub-Saharan Africa are not in the picture. Theorist Eric Maskin agrees with this conclusion and suggests that while average income has been rising as a result of more trade and global production, inequality has also increased (World Bank, 2007), by contrast there are arguments that suggest that increased openness to trade and investment has reduced overall global inequality (sph.umich.edu, 2000). (Dollar & Kraay, 2002) suggests that the current wave of globalization, which started around 1980, has actually promoted economic equality and reduced poverty.

because of unpredicted foreign exchange earnings from oil exports - that came to end in an economic and political crisis, producing a series of changes during the eighties and nineties that, far from solving the basic problems of poverty and inequality, seems to be the cause of even more new conflicts.

No other countries economy is impacted as severely as Mexico based on the financial outlook of the United States. The US economy, government and election process controls the direction of the Mexican peso. This is obviously the case of the dog wagging the tail.

But Mexico had an ace up its sleeve: the North American Free Trade Agreement (NAFTA), which had come into effect on January 1st 1994. President Bill Clinton of United States reasoned that Mexico, then America's third-largest trading partner, must be helped because of its importance to American jobs and investment as well as to dissuade a potential surge in illegal immigration into Mexico and to mitigate the spread of investors' lack of

Economic growth in Mexico is in just about World Bank interests. Mexico is one of the many countries that suffered as a result from getting an assistance. The debt crisis in early 1950s, the country received from the IMF and World Bank is just to pay its debt back to the international commercial banks. The IMF serves only for wealthy countries and voting power is determined by the amount of money that each country contributes into the IMF's quota system. The World Bank only extend loans if Mexico agree to accept the structural adjustment programs (SAPs) which are not democratically decided upon the people of the debtor in Mexico. The Children at Work in Mexico, still one of the project that created problems to receive its assistance. The IMF or World Bank blocked the government from

A prime reason to support the source’s argument is the rapid increase of global inequality in both first world and third-world countries. Proponents of globalization argue that the global integration of trading goods between countries have increased the average income within countries, as well as reduce wealth inequality. However, through current data analysed by The United Nations, it is estimated that over the past 30 years, the rise in inequality between developed and developing countries has been exponential. Economists such as the one quoted above have deducted that the increasing disparity has highly been due to the rapid globalization that has been enforced throughout the world. Nobel Laureate Eric Maskin of Harvard University theorizes

 Aisbett, E. (2007). Why are the Critics So Convinced that Globalization is Bad for the Poor? University of Chicago Press.

The situation that arose in Mexico in 1995 after the devaluation of the peso by 15% sent the currency into a downward spiral over the succeeding months in what became known as the Mexican Peso Crisis. A currency crisis is defined by a sharp and unexpected decrease in the value of the currency. This was precisely the case in Mexico, losing over 60% of its value in less than four months. The drastic nature of the crisis came as a surprise to many because of the unprecedented success of the Mexican economy in the years before. Mexico had curbed its inflation, posted very impressive growth rates, and was reaping the global benefits of the imminent North American Free Trade Agreement. It certainly looked as if this historically unstable

The reduction of the gap in the standard of living between the rich and the poor can be attributed to capitalism and technological advance. Efforts in the past to solve poverty in other countries through foreign either foreign aid or loans have failed because they were short-term fixes. Capitalism, on the other hand, proved to be the most effective system to cure poverty in the world. Instead of simply giving money to impoverished nations, capitalism created jobs and incentives for the poor to exchange their labor in the market for better wages, goods and services. The impact of globalization on the workers of the developing nations has been very positive. In fact, these workers welcome foreign investment. The only people complaining are the Americans at home.

The 1994 Mexican Peso Crisis was a relatively short crisis. The economic policies of the Mexican government needs reviewing before going into the devaluation of the peso and the crisis itself. The President before the Mexican Peso crisis was Carlos Salinas during his administration Mexico continued a series of reform started by previous administrations in which they restructured their foreign debt, reduced their inflation rate, cut trade barriers and privatized various government institutions. Mexico had reduced tariffs on imports and stabilized their inflation rate because of their exchange rate policies. The deregulation or lack of proper regulation and changes in their monetary and fiscal policy can have a great effect on a countries economy. The beginnings of the problem started when Mexico privatized their banks. Privatization is when “a country divests itself of the ownership and operation of a business venture by turning it over to the free market system (Eun, Resnick 14).

Introduction It is known that Mexican trade has expanded significantly since 1983 to date. What has been the contribution of the North American Trade Agreement (NAFTA) to the expansion of Mexican trade? Has the expansion of Mexican trade contributed to the growth of the Mexican Economy? This paper investigates the historical relationship between trade and growth in Mexico, from 1970 to 1998. More specifically, it measures the importance of NAFTA on the opening of the Mexican economy. The above period includes two different stages of the Mexican economy. The first one, from 1970 to 1982, is a baseline for this research and represents the last phase of the industrial-import substation economy, characterized by widespread government

In 1994, the world saw the decline of the Mexican Peso, leading to what is now considered as the Mexican Peso Crisis. The crisis was characterized by the drastic decline in the value of the Mexican Peso. The Mexican Peso Crisis is considered significant because of its impact on other parts of the region, including Brazil. The following is a discussion of the causes and impact of the Mexican Peso Crisis.

Between1992-93, NAFTA agreement was in the center stage boosting investor confidence. During which peso was fairly stable, remaining in the lower half of the band. In the first 18 months of the program, inflation fell to less than 20 percent but then the pace of disinflation became very slow. It should also be mentioned that between1992-94 capital inflow to Mexico was 7 percent of GDP. There were also discussions regarding the appreciation of peso together with the growing current account deficit which was being financed by these inflows. To avoid the problem of rolling over a sizable amount of domestic debt at high interest rates and further rise in interest rates, Mexico had a crucial

The interconnected nature of the international business market was thrown into sharp relief in the wake of the 2008 credit crisis (Bernanke 2013). However, as detailed by Caramazza, Ricci & Salgado (2004), the dangers of financial interconnectedness were also manifested during the regional financial tsunamis that overtook East Asia, Mexico, and Russia in the 1990s. The authors refer to the phenomena as financial contagion. The Mexican crisis of 1994 95; the Asian crisis of 1997; and the Russian crisis of 1998 in all have the same root causes. Specifically, the authors state that sharing common creditors meant that a financial crisis in one country created instability in the creditor nation and sparked the need for the creditor to cut back on lending (a source of revenue) or to recall loans. The larger the number of loans, the greater the likelihood of financial instability spreading from one nation to another (Caramazza, Ricci & Salgado 2004: 52). In total, 9 economies "experienced substantial currency pressures during the six-month window of the Mexican crisis episode, 10 during the Asian crisis episode, and 13 during the Russian crisis episode," indicating the magnitude of the problem (Caramazza, Ricci & Salgado 2004: 55).