The Mexico Crisis: The Mexico Peso Crisis

The Mexico Peso Crisis - 1995

In 1995 Mexico was amidst what was known as the “Mexico Peso crisis or The Tequila crisis” (2016, Wikipedia). This resulted in the Mexico Peso devalued against the American dollar which caused first world nations to come to Mexico’s financial aid. Those funds were “…administered by the IMF” (2016, Wikipedia) in hopes to “…deter illegal immigration…boost investor confidence in the economy and prevent further collapse…” (2016, Wikipedia).

The issues that resulted in this financial aid included Mexico experiencing a severe recession, the countries “GDP declined by another 6.2% over 1995…before the bailout” (2016, Wikipedia), hyperinflation and extreme poverty increased, real wages and unemployment doubled. What

What is unclear is had Mexico focused on a repayment plans via their own means resulting in financial stabilization or future financial unrest. Part of the preceding factors contributing to the accumulation of debt and bailout was due to large loans being made to private business sectors, investor insecurity due to “Zapatista Army of National Liberation declared war on the Mexican government…” (2016, Wikipedia) and Mexico’s fixed exchange rate. It is unclear had Mexico completed financial restricting if that would have absolved the countries citizens from experiencing a spike in poverty and hyperinflation. It would have avoided the country’s finances from being controlled by foreign banks but a benefit of Mexico’s economy being controlled by foreign banks was regaining investors’ confidence. Due to the preceding factors that contributed to Mexico’s financial crisis it appears the bailout was a correlation not a cause of the short term negative financial impacts on its citizens. It is possible that Mexico would have experienced the hyperinflation and extreme poverty due to its own financial decision making. Having IMF and foreign country bailouts allowed for a long term financial strategy to stabilize the economy and have additional financial decision makers to assist in the countries long term

(1995) What to Expect From IMF? Look At Mexico. Retrieved from: http://www.cato.org/publications/commentary/what-expect-imf-look-mexico Wikipedia. (2016) Mexican peso Crisis. Retrieved from: https://en.wikipedia.org/wiki/Mexican_peso_crisis NYTimes. (1995) US Bailout of Mexico Verging On Success or Dramatic Failure. Retrieved from: http://www.nytimes.com/1995/04/02/business/us-bailout-of-mexico-verging-on-success-or-dramatic-failure.html?pagewanted=all Harvard EDU. (2012) Mexico’s financial crisis of 1994-1995. Retrieved from: https://dash.harvard.edu/bitstream/handle/1/9056792/12-101.pdf?sequence=1 Encyclopedia. (2000) Mexican Bail-Out. Retrieved from: