Mexico's financial vulnerability: then and now

Jose Lopez () and Erwan Quintin ()

Economic Letter, 2006, vol. 1, issue jun, No 6

Abstract: Financial turmoil dots Mexico?s recent economic history. Between 1975 and 1995, the nation experienced recurrent currency, debt and banking crises with devastating effects on real economic activity. ; In Mexico, election years often heighten the risk of financial instability. Debt defaults or massive devaluations?or both?have accompanied three of the past five presidential elections. Given that history, it?s not surprising that questions about Mexico?s financial vulnerability have arisen with the approach of July?s presidential election. ; While the concerns may be understandable, Mexico has come a long way in recent years. The 2000 elections took place without financial repercussions, and this year the country isn?t nearly as vulnerable as it was prior to the 1994 Tequila Crisis. Mexico is by no means immune to crises; recent history tells us that few nations are. But Mexico has taken important steps to reduce the likelihood of another financial collapse, and the country appears well positioned to maintain economic stability through the election year.

Date: 2006
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