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 out growth has increased. Mexico's recovery, however, has been neither smooth nor rapid.

In mid-1982, Mexico was in deep economic crisis compounded by an unfavorable international environment. Mexico was saddled with a large foreign debt, world interest rates were high, commercial banks had stopped lending, and the price for oil was dropping. Conditions at home were no better with rampant inflation, increasing capital flight, and chaos in financial and foreign exchange markets. To confront internal imbalances and accommodate adverse external conditions, Mexico adjusted its consumption and output, then sought new ways to foster growth. The crisis and adjustment imposed great hardship and demanded enormous discipline on the part of the government. This was accomplished without serious political or social disruption.

In this book, Nora Lustig analyzes Mexico's economic evolution from the outset of the debt crisis in 1982 until the sweeping reforms began to bear fruit in the early 1990s. She explains the causes of the 1982 economic crisis and why it took Mexico "so long" to restore stability and growth. She also explores the question of the social costs of economic crisis and adjustment, and why the process may have been easier for Mexico than other debt-ridden countries. A discussion of the emerging role of the state in Mexico and the country's new outward-oriented development strategy is followed by an analysis of its search for greater economic integration with the United States and Canada.

Selected by Choice as an Outstanding Book of 1992

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Product Details

  • ISBN-13: 9780815753209
  • Publisher: Brookings Institution Press
  • Publication date: 9/28/1998
  • Edition description: REV
  • Edition number: 2
  • Pages: 287
  • Product dimensions: 6.20 (w) x 9.10 (h) x 1.00 (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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