Mexico 1988-1991

Abstract

Ever since the financial crisis of 1982, stagnation and economic crisis have dominated the Mexican economy. A variety of economic policies have been applied in an attempt to solve the problem of maintaining a high rate of sustained economic growth while controlling inflationary pressures. In the name of national economic modernization, different schemes have been implemented in an effort to achieve greater economic openness and increasing financial stability. Changes have been introduced to reduce the size of the state sector in accordance with changing global patterns of productivity, finance, and commerce and to bring it more into line with the new social and political relations now operating in a global economy that is increasingly interdependent and competitive (Borrego, 1990). In the period 1988-1991 an important confluence of strategic changes in international politics and economics coincided with the deterioration of Mexico's economic situation precipitated by the stock market crash of October 1987 and the disorganization of economic policy resulting from capital flight. This period also saw spiraling inflation, devaluation, an increase in internal interest rates, and the danger of a social explosion because of the drop in salaries and wages and growing threats of strikes, all of which combined to worsen the political crisis. The disarray in economic policy was reflected in the reversal of the short-lived boom that the economy had begun to experience at the start of the second trimester of 1987. There was a sudden drop in the stock market index from 373,000 points at the beginning of October to 106,000 at the close of 1987. During that period some $2-3 billion fled the country, with the peso suffering a devaluation of about 35 percent in the last two months of 1987 alone. The annual rate of inflation (month to month) reached 160 percent,