Economic & Political Analysis of Mexico

The central issues that defined Mexico over the decade or so prior to 1990 were the emergence of the country's huge external debt problem and the government's initiatives to reverse prior constitutionally mandated agrarian land reform. These two issues remained salient in the 1990s, as the peso crashed, the economy floundered, and the Chiapas peasants revolted against the central government, largely over political representation and land issues. Unfortunately for the Mexican government these issues have not been resolved through 1998, and, as a consequence, they will loom as large issues which must be dealt with in Mexico's future.

Land reform will be a central issue in Mexico's future development. A failure to implement effective agrarian land reform is a major barrier to economic development. Prior land reform efforts in Mexico have been high profile governmental efforts, but they have been both incomplete and high in rhetoric. Past land reform efforts in Mexico were aimed at helping the peasants; however, the changes to the Mexi

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at: The voracious appetite in the United States and other industrialized countries for investments in emerging markets was initially interpreted as a reaction to opportunities created by economic reforms. The explanation was that investors had realized the benefits of diversifying the risk in their portfolios by spreading them internationally, and emerging markets provided the opportunity to do so. The Mexican crisis showed that the prospect of high yields rather than prudence motivated this internationalization. Investors were looking abroad for the high returns that they were not getting at home, given the bearishness of financial markets in the United States, Japan, and Europe. All it took to reduce the interest of investors in the benefits of international diversification was for the U.S. Federal Reserve Board to raise interest rates or for the Mexicans to devalue their peso. The Mexican financial crash in late-1994 had dramatic effects on four of the country's macroeconomic measures·GDP, consumer prices, unemployment, and balance of payments. The effects of the crash on these four variables are illustrated in Charts 1 through 4, which may be found on the next few pages. As the data presented in Chart 1 [see below on t
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Approximate Word count = 4384
Approximate Pages = 18 (250 words per page)

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