Mexico: The Remaking of an Economy / Edition 2

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Today Mexico is viewed as a success story in the management of economic adjustment and structural reform. Inflation is under control, capital and foreign investment are returning, and output growth has increased. Mexico's recovery, however, has been neither fast nor smooth, and the social costs the country has borne for the past several years have been very large. In 1982, Mexico faced a severe balance-of-payments crisis. Rampant inflation, capital flight, and a collapse of economic activity were the consequences of an overexpansionist fiscal policy and adverse external conditions. For the next five years, the Mexican government struggled to restore stability and growth without success. Falling oil prices and lack of adequate external financing made these goals extremely difficult to achieve. With the implementation of the Economic Solidarity Pact, inflation was finally brought down in 1988. However, fiscal discipline and far-reaching reforms notwithstanding, growth did not follow. To convince investors to put their capital in Mexico required something more. Initiatives such as the reprivatization of the banking system and the pursuit of a free trade agreement with the United States finally produced the observed turnaround starting in 1990. In this book, Nora Lustig tells the story of adjustment and reform in Mexico from the onset of the debt crisis in 1982 through the early 1990s when the sweeping reforms began to bear fruit. The author looks closely at the social costs of adjustment and who bore the greatest share. In addition, she explores the characteristics of the new development strategy and analyzes the motivations and potential consequences of Mexico's search for greater economic integration with the United States.
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Product Details

  • ISBN-13: 9780815753193
  • Publisher: Brookings Institution Press
  • Publication date: 9/28/1998
  • Edition description: REV
  • Edition number: 2
  • Pages: 287
  • Lexile: 1580L (what's this?)
  • Product dimensions: 6.00 (w) x 9.00 (h) x 0.80 (d)

Meet the Author

Nora Lustig is a senior fellow in Brookings' Foreign Policy Studies program and the editor of Coping with Austerity: Poverty and Inequality in Latin America (Brookings, 1995).

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Table of Contents

Abbreviations and Acronyms
Introduction 1
Mexico's Adjustment and Recovery: A Summary 2
A Note on Method 12
1 The Genesis of the 1982 Crisis 14
The Golden Years of "Stabilizing Development" 14
Macroeconomic Imbalances and the 1976 Balance-of-Payments Crisis 17
The Oil Boom and the Onset of the 1982 Crisis 20
Concluding Remarks 26
2 From Crisis to Recovery 28
The First Attempt at Stabilization, 1983-85 29
The Failure of the First Stabilization Program 34
From the 1986 Oil Shock to the 1987 Run on the Peso 39
The Implementation of the Economic Solidarity Pact 50
The Pursuit of Economic Recovery 55
Concluding Remarks 59
3 The Social Costs of Adjustment 61
Adjustment, Living Standards, and Income Distribution 61
Living Conditions before the Crisis 65
Trends in Earned Real Incomes since 1982 66
Unemployment and Employment Patterns 75
Social Income: The Evolution of Public Spending on Social Sectors 78
Resource Availability in Education and Health 83
Food Subsidies: From General to Targeted 86
Social Indicators: Nutrition and Health, Education, and Incidence of Crime 87
Household Survival Strategies 89
Who Bore the Costs and to What Extent? 92
Concluding Remarks 94
4 Public Sector Reforms 96
Fiscal Policy Reform 98
Divestiture of Public Enterprises 103
Deregulation 107
Concluding Remarks 112
5 Looking Outward: Reforms in the Foreign Trade and Investment Regimes 114
Trade Liberalization 117
Impact of Trade Liberalization on Economic Performance 120
Industrial Programs 122
The Changing Foreign Investment Regime 125
Intellectual Property Rights 129
Joining the General Agreement on Tariffs and Trade 130
Seeking Closer Ties with the United States 132
Concluding Remarks 137
Epilogue 140
Appendix: Agreement Signed by Mexico and Its Commercial Banks on Debt and Debt Service Reduction 141
Notes 145
Index 181
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