Mexico's Economic Downturns: A Historical Analysis (1976-2008)

Economic Crises in Mexico (1976-2008)

Defining Economic Crisis

An economic crisis is characterized by a decline or stagnation in output and real incomes, leading to reduced employment and an uneven distribution of national wealth and income.

The 1976 Economic Crisis

1. Fiscal disorder in the U.S.
2. The Bretton Woods Agreement established the dollar as the reserve currency for all countries.
3. External financing of the fiscal deficit and current account.
4. In 1973, the Bretton Woods arrangement collapsed, and flotation was established between currencies.
5. High petroleum prices and increased contributions.
6. Excessive government spending.
7. Public debt as a percentage of GDP: 12% in 1970, rising to 35% in 1976.
8. Increased foreign loans and bank credit in Mexico.
9. Central bank financing of the deficit.
10. Annual inflation rate rise (11.6% to 27.2%).
11. Loss of international reserves.
12. GDP growth decreased to 2.1%.
13. Significant cash withdrawals from banks.

The 1982 Crisis: José López Portillo

1. Opening of new oil fields.
2. Initial economic growth.
3. Global oil price shock.
4. Inflation rose to 13.5%.
5. 20% increase in federal funds rate.
6. Significant drop in GDP growth rate.
7. Indebtedness initially not considered excessive.
8. Inevitable peso devaluation in February 1982.
9. Imposition of exchange controls.
10. September 1st: Expropriation of private banks.

Miguel de la Madrid's Presidency

1. Controversy surrounding exchange controls.
2. Reprivatization of banking assets.
3. Capital flight.
4. Trust fund (RIGSCO) coverage.
5. GDP decreased in 1982, 1983, and 1986.

The 1994-1995 Crisis (Tequila Effect)

Main Causes

1. Assassination of presidential candidate Luis Donaldo Colosio.
2. Emergence of political destabilizing factors.
3. Kidnappings of prominent businessmen.
4. Uncertainty related to the Chiapas conflict.
5. Increases in U.S. interest rates.

Banking Crisis

1. Mismanagement following the reprivatization of banks under Salinas de Gortari.
2. Mismanagement led to profligate credit authorization and lending practices.

The 2008 Global Financial Crisis Impact

1. Triggered by the global financial crisis.
2. Significant growth in public and private debt.
3. Increased debt defaults: Many loans failed to be repaid.
4. Negative impact on banks and manufacturing sectors.
5. Reduction in public expenditure.

Alternative Solutions for Economic Crises

1. Increasing public expenditure.
2. Increase in investments.
3. Increase in taxes.
4. Careful management of the public deficit.