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Economy of Mexico

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  1. Introduction.
  2. Economic growth.
    1. Causes of the growth and the role of the government.
  3. Macroeconomic instability.
    1. Tequila crisis.
    2. The national development plan.
  4. Conclusion.

From the 1940's until the 1960's there was a strong economic growth in Mexico. This strong economic performance proceeded into the 60's. Manufacturing was the country's dominant growth sector and attracted many foreign investors. Although there was a growth in Mexico, there was fiscal mismanagement which also resulted in a sharp deterioration of the investment climate. During the leadership of José Lopez Portillo during the mid 70's, Mexico became a huge petroleum producer. At the end of his term of leadership Mexico had a huge external debt, because of Mexico's huge governmental borrowing due to the high amount of incomes from petroleum.Oil and petrochemicals became the economy's most dynamic growth sector. In 1973, the oil shock combined with fiscal mismanagement caused a huge disequilibrium in the balance of payment in Mexico. It even became unmanageable as capital flight intensified, forcing the government to devalue the peso by 45%. This action ended Mexico's twenty year fixed exchange rate and started the popular Mexican Sexenio crisis. Between 1978 and 1981, the government spent heavily on energy, transportation, and basic industries.

[...] Those Governments have spent a lot of money to promote Mexico to foreign investors. During this period, enhance of petroleum prices, which are very profitable to Mexico's GDP growth: the Import Substitution Industrialization as a development strategy seem to have been successful. But, in the 1980s, oil prices fall down and the country can't pay its debt because of increase of American interest rates. Moreover, the crisis isn't only in Mexico, the world goes into a profound recession that's why Mexican exports prices decrease. [...]

[...] Mexico is known as a country of many economic crises, but they have always managed to come out of their crisis. It is most likely that a crisis will occur again, especially when the economic crisis hits The United States, since most of their exports go to the US. CONCLUSION Mexico has many strengths but also many weaknesses. One of their main strengths is that they export oil, this is especially important since the oil prices have gone up to more than 53 $ a barrel. [...]

[...] Mexico was the second largest of the Third World debtors, behind only Brazil. Throughout the 1980s, almost half of the earnings from Mexican exports were needed just to make the payments on the debt, with most of this money going for interest. In 2003 the Mexican debts consisted of 23% of GDP. By looking at table 8 you can see that there was an increase in unemployment during the debt crisis in 1981. As a result of foreign direct investment, there is a raise of $8,000 in 1994, which is where the second crisis started. [...]

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